December durable goods orders increase by twice as much as expected.
The report from the Commerce Department’s Census Bureau on December Durable Goods Orders indicated a 4.6 percent increase from November, despite expectations for improvement between 1.6 percent and 2.0 percent.
From the report:
New orders for manufactured durable goods in December increased $10.0 billion or 4.6 percent to $230.7 billion, the U.S. Census Bureau announced today. This increase, up seven of the last eight months, followed a 0.7 percent November increase. Excluding transportation, new orders increased 1.3 percent. Excluding defense, new orders increased 1.2 percent.
Transportation equipment, up following two consecutive monthly decreases, had the largest increase, $8.1 billion or 11.9 percent to $75.9 billion.
Another surprisingly positive report came from the Dallas Federal Reserve. The Dallas Fed Manufacturing Survey for January was expected to decline by at least 4 percent and as much as 6.5 percent from December. As it turned out, the production index jumped by 12.9 percent. Changing the Way Money Is Made and Diseases Are Cured
From the report:
Texas factory activity rose sharply in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 3.5 to 12.9, which is consistent with faster growth.
Other measures of current manufacturing activity also indicated stronger growth in January. The new orders index jumped 13 points to 12.2, its highest reading since March 2011. The capacity utilization index shot up from 2.1 to 14.0, implying utilization rates increased faster than last month. The shipments index rose 9 points to 21.9, indicating shipments quickened in January.
Perceptions of broader business conditions were more positive in January. The general business activity index increased from 2.5 to 5.5, its best reading since March. The company outlook index also rose sharply to 12.6, largely due to a drop in the share of firms reporting a worsened outlook from 10 percent in December to 6 percent in January.
The report on Pending Home Sales for December from the National Association of Realtors turned out to be a big disappointment. Although economists had been expecting a slight 0.3 percent decline from November, the report disclosed a huge, 4.6 percent drop. Nevertheless, on a year-over-year basis, there was a 6.9 percent increase. Median Household Incomes: Down 0.5% in 2012
From the report:
The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 4.3 percent to 101.7 in December from 106.3 in November but is 6.9 percent higher than December 2011 when it was 95.1. The data reflect contracts but not closings.
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The PHSI in the Northeast fell 5.4 percent to 78.8 in December but is 8.4 percent higher than December 2011. In the Midwest the index rose 0.9 percent to 104.8 in December and is 14.4 percent above a year ago. Pending home sales in the South declined 4.5 percent to an index of 111.5 in December but are 10.1 percent higher December 2011. In the West the index fell 8.2 percent in December to 101.0 and is 5.3 percent below a year ago.
The major ETFs expected to respond to Monday’s economic reports are:
Industrial Select Sector SPDR ETF (NYSEARCA:XLI) +0.07%
iShares Dow Jones Industrial Sector Index ETF (NYSEARCA:IYJ) -0.13% Learn More About iShares ETFs
iShares Dow Jones Home Construction ETF (NYSEARCA:ITB) +0.08%
Vanguard REIT ETF (NYSEARCA:VNQ) +0.26%
Materials Select Sector SPDR ETF (NYSEARCA:XLB) -0.96%
Bottom line: Although pending home sales declined more severely than expected in December, the total rose by nearly 7 percent on a year-over-year basis. That fact, combined with the overwhelmingly positive Dallas Fed Manufacturing Survey and the December report on Durable Goods Orders brought us an upbeat start to a week filled with important economic reports.