December Durables Advance Report: All Systems ‘Go’

The new year continues to surprise and delight, even with last year’s December figures. The U.S. Census Bureau announced on Thursday that new orders for manufactured durable goods increased by 3.0 percent last month, to $214.5 billion, exceeding a consensus forecast of 2.0 percent. This follows a 4.3 percent increase in November making five out of the last six months showing rises.

A 5.5 percent increase in December was seen for transportation equipment, up to $58.4 billion, making that category of orders the largest in dollar terms, the majority of which were orders for nondefense aircraft and parts. Other notable order increases over November were machinery (6.0%), nondefense capital goods (5.8%), and primary metals at 5.1 percent.

Shipments of manufactured durable goods rebounded from a 0.3 percent November drop, to an increase of 2.1 percent in December, or $4.3 billion. Primary metal shipments led the way with a whopping 8.2 percent rise, to a total price of $29.0 billion, the highest level since the series was first published in 1992.

Not to be outdone, unfilled orders rose by 1.5 percent to $912.3 billion, following a trend of increases in twenty out of the last twenty one months. As in orders, transportation equipment was the largest component here, with a rise of 2.1 percent to a total of $529.7 billion. Again, nondefense aircraft and parts were the driving forces. The unfilled status of so many orders suggests that higher levels of production activities might well become necessary.

Inventories were also up, across the board. The increase was 0.3%, to a total of $370.1. The usual suspect, transportation equipment, was again the highest gainer, up 1.5% to $116.4 billion. Large inventories are often regarded as a negative during recessions, meaning quantities of unwanted goods stacking up. But during recoveries they are seen as stocking up for expected higher sales levels. Indeed, the ratio of (new plus unfilled) orders to inventories was roughly 3 during December, compared to a low of 0.6 in January 2009. Companies are not buying these goods just to have them to look at.

Finally, new orders, shipments, unfilled orders and inventories of capital goods rose accordingly in December. Demand for capital goods is derived from the demand for finished products, as these are goods that producers use to produce other goods. Judging from all the December data, there might be plans afoot to do a lot more of that.

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