Ian Shepherdson Orders Quotations

Overall, this is a very robust report. There was a big upward revision to November orders excluding transportation, to a gain of 0.6% from down 0.6%.

Output will not immediately accelerate to the pace suggested by the orders numbers ... because companies are still aggressively running down inventory.

Manufacturers are still miserable, and output will keep falling for some time, but they can now see light at the end of the tunnel, ... They are working off their excess inventory ... and are now hopeful of stronger orders by the year-end.

The bottom line here is that the month-to-month volatility in the durable orders data is such that the true information content in a single report is very small -- there's just too much noise.

The report suggests that industrial orders are trending higher as manufacturing recovers from the Asia crisis, ... There are no real signs of a slowdown.

The headline is all about Boeing, which reported 200 new aircraft orders in May, up from 14 in April. Unusually, it seems that nearly all these orders have hit the official data immediately. Apart from this, however, these are soft data. Ex-transportation orders fell 0.2% and there was a downward revision to April, now put at -0.7%.

The January revision is mostly due to the plunge in aircraft orders reported in the durable-goods numbers. In February, the index was pulled down by lower consumer confidence, higher jobless claims, shorter delivery times and lower building permits.