Implications:  New orders for durable goods fell 3.3% in October, which was well below what the consensus expected.  Moreover, most of the decline occurred outside the volatile transportation sector.  However, since late last year the durables report has exhibited a clear quarterly pattern of significant weakness in the first month of every quarter, followed by consistent strength in the following two months.  For example, in July, orders ex-transportation declined 2.1%.  Orders then increased a total of 3.4% in August and September.  Shipments of "core" capital goods (which exclude civilian aircraft and defense) fell 1.5% in October, the first decline in the past nine months, but we expect this to turnaround very soon.  Unfilled orders (the backlog, which can turn into future shipments) have increased at a 9.1% annual rate in the past three months.  Business investment in equipment will increase substantially over the next couple of years.  Capacity utilization has increased rapidly in the past year and the industrial sector could easily reach 80% utilization (the long-term average) in 2011.  Meanwhile, corporate profits are at all-time record highs, meaning companies have the incentive and ability to expand operations.

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