Another swing higher for commercial aircraft lifted durable orders 5.4 percent higher in November following a swing lower for commercial aircraft in October that left orders down a revised 5.1 percent. Excluding transportation shows visible progress: up 0.5 percent to more than reverse October's 0.3 percent decline and add to September's 0.2 percent gain.

Commercial aircraft (nondefense aircraft and parts) jumped 80.1 percent to $32.3 billion following October's 43.8 percent drop and September's 90.6 percent surge. For comparison, the dollar value of total durable orders in November came in at $295.4 billion.

Also part of the transportation group are motor vehicles which, likely reflecting the end of labor actions, jumped 2.8 percent to $60.8 billion following declines of 4.1 and 2.5 percent in the prior two months.

Another sign of progress comes from core capital goods orders (nondefense ex-aircraft) which jumped 0.8 percent to reverse a downwardly revised 0.6 percent drop in October and a 0.2 percent decline in September. November's dollar value for the core capital goods group totaled $74.0 billion and included sharp gains for computers, communications equipment, and electrical equipment.

Unfilled orders are becoming a great positive for the factory sector, jumping 1.3 percent for the second time in three months in what are giant builds tied directly to commercial aircraft where unfilled orders have surged the last three months, by 3.0 percent in November and surpassed by a 3.2 percent jump in September.

Other data in today's report include a 1.0 percent rise in total shipments and a flat 0.1 percent rise in inventories in a reading that would appear certain to climb given the overall strength in activity.

These results leave the Relative Performance Index at plus 25 to indicate that recent US economic data, on net, are coming in safely ahead of forecasts.

Forecasters see durable goods orders rising 2.4 percent in November following October's 5.4 percent fall and September's 4.0 percent jump that both reflected swings in aircraft orders. Ex-transportation orders are seen up a slight 0.2 percent in November with core capital goods orders, which have been weakening, rising a marginal 0.1 percent.

Durable goods orders are new orders placed with domestic manufacturers for factory hard goods. The report also contains information on shipments, unfilled orders and inventories. The advance release provides early estimates and is revised about a week later by the factory orders report.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. Rising equity prices thrive on growing corporate profits - which in turn stem from healthy economic growth. Healthy economic growth is not necessarily a negative for the bond market, but bond investors are highly sensitive to inflationary pressures. When the economy is growing too quickly and cannot meet demand, it can pave the road for inflation. By tracking economic data such durable goods orders, investors will know what the economic backdrop is for these markets and their portfolios.

Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduce the prospects for inflation.

Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments.

Importance
Durable goods orders are a leading indicator of industrial production and capital spending.

Interpretation
The bond market will rally (fall) when durable goods orders are weak (strong). A moderately healthy report for new orders bodes well for corporate profits and the stock market, however. Durable goods orders are one of the most volatile economic indicators reported in the month and this series can be revised by significant amounts from one month to the next. More than any other indicator, it is imperative to follow either three-month moving averages of the monthly levels or year-over-year percent changes. These adjustments smooth out the monthly variability and provide a clearer picture of the trend in the manufacturing sector.

Whenever economic indicators are particularly volatile, it becomes customary to exclude the more variable components from the total. For instance, market players exclude defense orders and transportation orders from durable goods because these fluctuate more than the overall total. Incidentally, aircraft orders are the guilty culprit, which are included in both of these categories. Airplanes are ordered in quantity, not one at a time. Analysts exclude the categories containing aircraft orders because they obscure the underlying trend, not because the aircraft industry is unimportant.

Economists closely watch nondefense capital goods orders as a leading indicator of capital spending. Typically, traders follow the special series for nondefense capital goods excluding aircraft because it shows the underlying trend for equipment investment after discounting sharp swings from aircraft orders.

Durable goods orders are measured in nominal dollars. Economic performance depends on real, rather than nominal growth rates. One can compare the trend growth rate in durable goods orders with that of the PPI for finished goods to assess the growth rate in real orders.