Economic Watch: Durable Goods Mixed; New Home Sales, Consumer Confidence Higher

Shipments of U.S. manufactured durable goods, those designed to last three years or more, rebounded in December but new orders turned in its worst performance since August, according to a new U.S. Commerce Department report.

Shipments increased 1.1% from November following two consecutive monthly decreases. Transportation equipment, up three out of the last four months, led the hike by gaining 3.1%.

New orders declined 3.4% from the month before, the fourth drop out of the last five months. The decline was led by a 9.2% falloff in transportation orders, also down four out of the last five months. Excluding transportation, new orders decreased 0.8%. Excluding defense new orders declined 3.2%

Orders for nondefense capital goods, an indicator of future business investment, fell 9.7% but shipments gained 0.2%.

Despite expectations of a rebound, orders remain weak, suggesting businesses are increasingly losing confidence in the underlying momentum and sustainability of the U.S. recovery, according to Sterne Agee Chief Economist Lindsey Piegza.

“Despite healthy balance sheets, corporations are hesitant to invest in equipment, structures, or full-time, high-wage employees. Without investment and business growth, hiring will remain modest at best and wage growth minimal,” she said.

Other analysts say the lower numbers for new orders raises concerns about a global economic slowdown.

New Home Sales Edge Higher

A separate Commerce Department report shows new homes sales in December increased 11.6% from November’s revised rate. Compared to the same time a year ago, December’s sales level was 8.8% higher.

An estimated 435,000 new homes were sold in 2014, 1.2% higher than during 2013, described by some analysts as a less than robust year.

Consumer Confidence Soars

Finally, a third report shows consumer confidence rose sharply this month, hitting its highest level since August 2007, according to the private research group The Conference Board.

Its Consumer Confidence Index, which had increased in December, moved higher to 102.9, up from 93.1 in December. The Present Situation Index rose to 112.6 from 99.9, while the Expectations Index increased to 96.4 from 88.5 in December.

“A more positive assessment of current business and labor market conditions contributed to the improvement in consumers’ view of the present situation,” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers also expressed a considerably higher degree of optimism regarding the short-term outlook for the economy and labor market, as well as their earnings.”

Consumers’ assessment of present-day conditions was considerably more favorable in January than in December. Those saying business conditions are “good” increased from 24.7% to 28.1%, while those claiming business conditions are “bad” decreased from 18.9% to 16.8%. Consumers were also much more positive in their assessment of the job market. Those stating jobs are “plentiful” increased from 17.2% to 20.5%. Those claiming jobs are “hard to get” decreased from 27.3% to 25.7%.