Orders for durable goods dropped sharply in January, if we look at the overall number, which includes high-priced aircraft. However, according to the Commerce Department, which issued the data earlier this morning, if we exclude the volatile transport component, such orders actually rose modestly.

In all, total orders fell by an outsized 5.2% last month. That setback reversed a solid increase of 3.7% in orders in December. But, if we back out the transportation component, we find that demand for such long-lasting manufactured goods actually rose by 1.9%. The big difference was defense orders, which plummeted in January. To wit, defense capital goods orders plunged by 69.6% last month, the biggest percentage change since January of 2000. In December, military spending had more than doubled, helping this series to the aforementioned 3.7% gain, overall.

The composite drop also included a dramatic decline in the highly volatile civilian aircraft category, which tumbled 34.0%. Outside the volatile defense and civilian aircraft categories, there was clear underlying strength in this series. For example, a key measure of business investment--nondefense capital goods orders excluding aircraft--rose by 6.3% last month. That was the best showing in more than a year.

Also, new orders for machinery jumped by a sizable 13.5%, the best performance here in nearly three years. Among some individual components, we saw strength in the aforementioned machinery area. In addition, gains were recorded in orders for fabricated metal products, electrical equipment, and nondefense capital goods, excluding aircraft.

Conversely, weakness was shown in orders for primary metals, computers, defense aircraft and parts, and nondefense aircraft and parts. Orders for motor vehicles and parts were unchanged last month.

Taking this series as a whole, this was a notably better showing than the headline number would suggest, and a performance that does not change our principal assessment that we are in a long period of sluggish, but clearly advancing, economic growth.     

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.