Implications: Today's headlines on durable goods orders and unemployment claims were disappointing. However, the details of the durables report and extenuating circumstances on claims suggest the case for robust economic growth remains intact. Almost all the weakness in orders was due to civilian aircraft, which are extremely volatile and which hit a 20-year low in December. Including revisions to prior months, new orders for durable goods excluding transportation rose 1.5%. Meanwhile, shipments of "core" capital goods (which exclude civilian aircraft and defense) showed a strong gain in December, rising 1.7% after a 1.4% increase in November. We expect orders for durable goods to move higher in 2011 as firms are loaded with cash earning near zero percent interest and capacity utilization is approaching long-term norms. In other news this morning, new claims for unemployment insurance rose 51,000 last week to 454,000. The four-week moving average is now 429,000. Continuing claims for regular state benefits rose 94,000 to 3.99 million. Initial claims that would have been filed the prior week were delayed due to unusual southern snowstorms. The true underlying trend is likely near the 4-week moving average. On the housing front, pending home sales – contracts on existing homes – rose 2.0% in December. With three strong months in a row now, existing home sales, which are counted at closing, should continue to gain in January.
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