Instant view: Durable goods orders jump in November on aircraft

NEW YORK (Reuters) - New orders for U.S. manufactured goods soared in November on strong demand for aircraft, but a gauge of business spending plans fell for a second month, suggesting a cooling in investment.

U.S. consumer spending rose less than expected in November as tepid income growth put a squeeze on households, according to a government report on Friday that suggested slowing momentum in demand.

COMMENTS:

TIM GHRISKEY CHIEF INVESTMENT OFFICER OF SOLARIS ASSET MANAGEMENT IN BEDFORD HILLS, NEW YORK

"Certainly the top line number for durables was very strong but excluding transportation it was right in line with expectations. The durables has been a pretty strong number recently. The whisper expectation was for a beat on the core side excluding transportation. Transportation is so influenced by aircraft orders and aircraft orders are not locked in stone.

The PCE core shows benign inflation overall and that is a key number for the Fed - what the Fed watches in terms of inflation - so that was good. Personal income light as expected but at least on the positive side. Futures, very strong this morning, with a little bit of sell-off when this data came out. So a modest disappointment but probably not enough to overly weigh on the market."

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

DURABLES GOODS: "We saw some positive momentum in manufacturing but it's a mixed bag. Some industries are doing better than others."

PERSONAL SPENDING/INCOME: "It's suggesting some softness in the consumer sector. We are not in a recession, but growth is not especially strong either. We did get the extension on the payroll tax cut, which is going to help the consumer outlook in the first half of next year. The market has largely priced that in already."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"New orders for durable goods skyrocketed past market expectations, recovering in November to show a gain of 3.8%, when consensus placed order growth at 2%. The upwards movement was anticipated from many sources such as the expectation that transportation orders (which were responsible for the past two months of weak performances) would rebound, and the hint from ISM measurements showing manufacturers increased production and orders. Additionally encouraging is the fact that October's decline of 0.7% has been revised to that of a flat reading (even though transportation was still a drag, down 4.5%) meaning general activity was not as weak as originally thought.

"Transportation orders jumped by 14.7% with a big boost from aircrafts. Nondefense aircrafts were up 73.3% and defense was up 12.1%. Car orders slipped by 0.5% after having been up by 5.9%. Without support from transportation, orders would have edged up 0.3%. This compares to October's ex transportation rise of 1.5% which shows the influence of the transportation rebound.

"Looking at other orders, the performance was mixed with modest gains slightly edging past modest declines. Primary metals were up 5.2% while computers were down 4.4%. Electrics were down 1.2% yet machinery was up 0.9%. Capital goods rose by 7.7% (had been down 5.3%) thanks to nondefense orders rising by 8.1%.

"Unfortunately, orders for nondefense capital goods excluding aircraft, an indication of future business investment, fell by 1.2%. It's been down for the past two months."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"Personal income slowed to growth of 0.1% in November (or rose by $8.5 bln), after having risen by 0.4% in October predominately on wage gains (accounting for 79% of the advance). The deceleration was expected, but to a lesser extent as market consensus thought income would rise 0.2%. Wages were actually a detraction from income in November, and income is positive because of continued growth in rental incomes and receipts on assets incomes. Spending, also up 0.1%, also came in below expectations, which thought expenditures would continue its trend of outpacing income gains, and show an increase of 0.3%."

(Americas Economics and Markets Desk)