Price effects for petroleum and coal gave a deceptive lift to factory orders in December which rose 1.3 percent. A 3.1 percent jump in nondurable orders, reflecting higher energy prices, masks a 0.5 percent decline in durable orders.
Yet the drop in durables itself reflects an anomaly, that is a swing lower in defense aircraft. A clear plus in December is strength in capital goods data where the core reading (nondefense ex-aircraft) rose 0.7 percent following gains of 1.7 percent and 0.5 percent in the prior two months. These readings point to rising business investment for 2017.
Apart from new orders, shipments surged 2.2 percent in the month in part reflecting a gain for civilian aircraft where monthly readings are always bumpy. Inventories growth was contained to only 0.1 percent in the month, which is a positive for future production, while unfilled orders, however, sank for a second month, down a sharp a 0.6 percent which is of course a negative for future production and also future employment growth.
This is always a very volatile report with large components often making large month-to-month swings. But behind the noise is a factory sector that is still struggling but, driven by new business investment, may be showing emerging signs of momentum going into the new year.