INDICATOR: January Durable Goods Order
KEY DATA: Durables: -5.2%; Excluding Transportation: +1.9%; Business Investment: +6.3%
IN A NUTSHELL: "The surge in business capital spending is a good sign that the economy carried so decent momentum into the looming sequestration."
WHAT IT MEANS: If all we looked at the headline number on the demand for big-ticket items, you would think the economy is cratering. But alas, as we all now, the real story is always in the details and the reason for the collapse in durable goods orders was huge declines in both defense and non-defense orders. Meanwhile, the best measure of business investment, non-defense capital goods orders excluding transportation, rose sharply. Demand for machinery and electrical equipment led the way. Basically, except for Boeing, the private sector was looking to the future even as the sequestration risk continued to overhang the economy. There was some weakness in computers and communications equipment, which does temper the good feeling of the report a little. Inventories and non-transportation backlogs built, both signs that industrial activity should grow more strongly.