MAPI Analysis on Durable Goods: Tenor of Report Positive for U.S. Manufacturing

The following is an analysis from Cliff Waldman, Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the durable goods report for December 2011: 

“Like other recent data, the December 2011 report on demand for long-lasting goods paints a picture of an economy that ended a volatile and challenging 2011 on a positive note,” Waldman said. “Total new orders, now up during five of the last six months, increased a strong 3 percent after an even stronger 4.3 percent advance in November and for the year registered a solid 10 percent gain over 2010 levels.  Excluding the often volatile transportation component, orders were up a more modest 2.1 percent in December but were nonetheless a nice acceleration from a weak 0.5 percent increase during the previous month.  Even more encouraging were the data on new orders for nondefense capital goods excluding aircraft.  A widely accepted proxy for business equipment investment, this indicator had been flashing clear signs of slowing in recent months but increased a significant 2.9 percent in December and, like total new orders, was up by 10 percent for the year as a whole.  

“The sharp positive turn in equipment spending during December might very well have been motivated by concerns about the expiration of equipment expensing provisions,” Waldman added. “But the tenor of the December report was positive overall for U.S. manufacturing strength, with strong gains in such sectors as machinery and primary metals.  However, given the spate of data-distorting events that occurred during 2011, from the Japanese earthquake to unnerving fights over the U.S. debt ceiling, the December numbers are not necessarily indicative of a sea change in the U.S. outlook, especially in light of clear evidence of widespread slowing in global growth.   The most likely forecast for U.S. manufacturing is for positive but moderating output growth.”