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This morning, the U.S. Department of Commerce released its latest data on durable goods orders, and the report was another indication that the U.S. economy continues to improve. Specifically, the report said that new orders for manufactured durable goods increased $6.2 billion (or 3.0%), to $214.5 billion, in December. The advance, which comes on the heels of a 4.3% jump in November, marked the fifth increase in the last six months. The tally was better than the consensus expectation for the final month of 2011, which called for growth of around 2.0%.

More important, when broken down into components, the latest durable goods orders data were heartening. Excluding transportation, new orders increased 2.1% and when backing out defense orders, new orders advanced a healthy 3.5%. But perhaps the most encouraging aspect of the December new durable orders result was a nearly 3.0% jump in so-called core capital goods, which includes such items as computers and machinery, to a record $68.9 billion. Economic pundits closely monitor the core capital goods rate as it is viewed as a good way of gauging business investment. 

In addition to the manufactured durable goods orders, the latest Commerce Department report contained some other noteworthy figures. Indeed, the inventories of manufactured durable goods for December rose for the 24th consecutive month, increasing by $1.2 billion (or 0.3%), to $370.1 billion. The December figure was highest tally on record and followed a 0.6% rise in November. Meanwhile, new capital goods orders, which exclude defense orders, increased by $4.6 billion (or 5.8%), to $84.4 billion. These figures are a sign that U.S. businesses may be becoming more confident about their future prospects and are now more open to increasing their spending budgets on capital goods, which were cut back significantly during the latest recession.

In conclusion, our sense is that the latest figures on manufactured durable goods orders are yet another indication that the U.S. economy is strengthening, even if the improvement may still be selective. Later on this morning we will receive another important report on the current state of the U.S. economy when data on new home sales for the final month of 2011 are released.

At the time of this article's posting, the author did not have positions in any of the companies mentioned.