US Durable Orders: Gradual firming as headwinds begin to fade - Wells Fargo

According to analysts from Wells Fargo, it would be an overstatement to say that the manufacturing sector is taking off after today’s US durable goods orders report, but after a couple of difficult years for the sector, there are early signs of improvement. 

Key Quotes: 

“Durable goods orders posted the largest monthly decline since 2014 in November as a 73.5 percent drop in civilian aircraft orders weighed on the headline. However, when you exclude aircraft and other transportation orders, a solid 0.5 percent increase in November is more-or-less in line with the broad firming observed in factory data in recent months.”

“It would be an overstatement to say that the manufacturing sector is taking off, but after a couple of difficult years for the sector, there are early signs of improvement. Manufacturing production has increased in two out of the past three months. The ISM index has remained in expansion territory for three straight months, climbing higher each time.”

“The strong U.S. dollar, however, remains a headwind for domestic manufacturing companies by hurting the price-competitiveness of U.S. goods for foreign buyers. Compared to a basket of the currencies of our major trading partners, the greenback has appreciated more than six percent since October.”

“More encouraging was the significantly better-than-expected pickup in orders for core capital goods. This leading indicator of future cap-ex spending increased 0.9 percent in November. The back-to-back monthly gain follows a decline in September, which is holding the three-month annualized growth rate in negative territory. The theme right now in the manufacturing space is gradual firming rather than a roaring surge.”