Durable Goods Get Positive

Highlights include Caterpillar Inc. (CAT - Analyst Report), Ingersoll Rand Co., Ltd. (IR - Analyst Report), Parker Hannifin Corp. (PH - Snapshot Report) and General Electric Company (GE - Analyst Report).

The report on durable goods came in as expected, except for one huge thing -- it had a plus sign instead of a minus sign. That plus sign is a huge plus sign for the economy.

OK, I know that durable goods is a volatile series, and is often revised, but It came in at up 3.4%, when the consensus expectations were for it to be down about 2.5%, and that is a huge swing and a very refreshing change from the series of worse-than-expected numbers we had been getting on the economy.

Put this together with the increase in existing home sales we saw earlier this week, and you start to have some reasons for hope about the economy.

However, just how subject this series is to revisions was also put on display. The January number was revised sharply lower to a decline of 7.3% from its originally reported -5.2%. If the very volatile transportation sector is stripped out (a few orders for jumbo jets can really throw the numbers around) the decline in January was revised down to a 5.9% decline from its initial estimate of down 2.5%. In February it was up 3.9%.

Just about every sub-category in the report was up, and that comes on the heels of 4 straight months of horrific declines in everything but defense orders (which also swing wildly, and had very strong showings in November and December). Perhaps the most important number buried deep in the report is the new orders for capital goods excluding aircraft (core capital goods).

This gives us a very good idea of the overall pace of business investment in equipment and software. They were up 6.6%, partially reversing an awful 11.3% slide in January. New orders for Machinery were particularly strong, up 13.5%.

This is obviously very big and very good news for firms that make machines. Think firms like Caterpillar (CAT - Analyst Report), Ingersoll Rand (IR - Analyst Report) and Parker Hannifin (PH - Snapshot Report). The industrial side of General Electric (GE - Analyst Report) is likely also a major beneficiary of this sort of thing.

There is still a lot of ground to make up, and on a year-over-year basis the numbers are still awful, with year-to-date total new orders down 28.4%, and down 22.4% excluding transportation. Core Capital goods are down 23.8% year to date versus last year.

These numbers do not mean we are out of the woods, and shipments are of course going to lag new orders, They were down 0.5%, but even there that's one heck of a lot better than the -5.2% posted in January.

Still, to quote Sean Penn in Harvey Milk, "You gotta give them hope." These numbers do just that.