At first blush, the report on New Orders for Durable Goods was a disappointment. But digging through the details, it is not as bad as it first seems.

This report is one where digging through the details is especially important, and just going with the headline total number can be highly misleading. Total new orders for durable goods rose by 0.3% in December, only partially reversing a 0.4% decline in November and a 0.1% decline in October.

The increase was also far short of the 2.0% rise that was expected. However, most of the miss was due to the always volatile non-defense aircraft segment. A few orders for 777s from Boeing can really make the overall numbers swing. Non-defense aircraft orders plunged 38.2%, and that comes on top of a 40.0% drop in November. However in October they rose 47.8%. Did I mention that that segment of durable goods orders are volatile?

All is not lost for the Aerospace industry, though, since defense aircraft orders rose by 14.7%, but that comes on top of back-to-back declines of 10.4% and 6.5% in November and October, respectively. New orders excluding transportation rose by 0.9% on top of a 2.1% increase in November, and were well above the 0.5% increase expected. New orders excluding defense were up 0.3%, the third straight rise.

Perhaps the most important of the “deep in the seeds” numbers in this report is non-defense capital goods orders, excluding aircraft, also known as core capital goods orders. That is a very good measure of how much companies are investing in equipment and software, which are two of the direct inputs into GDP. These rose by 1.3% following a 3.1% rise in November.

In another optimistic sign, orders for motor vehicles rose by 3.6% — the third increase in a row — and a big acceleration from the 0.7% rise in November. Unfortunately, the report does not break out how much of that is coming from automakers like Ford (F) and how much is coming from heavy trucks makers like Paccar (PCAR). 

Year-Over-Year Numbers

The December report also provides the full-year differences in new orders for all of 2009 relative to 2008, and reminds us of just how nasty this downturn has been (and remember that 2008 was not exactly a banner year). Total new orders were down 20.2%, excluding transportation orders were down 17.7%, and excluding Defense orders were down 21.4%.

The non-defense aircraft industry saw a stunning 51.6% full-year decline. That area not only includes jumbo jets from Boeing (BA), but also light aircraft from places like Textron’s (TXT) Cessna division.

Many businesses have decided the impression that buying a new corporate jet gives is not that great when so many people are hurting. Total non-defense capital goods orders were down 24.6% for the year, and even with aircraft excluded they are down 18.4%.

If there is a bright spot, it is defense capital goods orders, which are down just 3.3% — but keep in mind this is in the context of two ongoing wars. Those are also orders that come from the Federal government and add to the deficit. While they might be needed from a National Defense point of view, they are not really all that good for the economy in the long run.

Still, despite the depths of the hole we are in, on balance we are working our way out of it, but at a very slow pace. As the graph below shows, both total new orders and core capital goods orders are still well below year-ago levels, the the rate of decline has slowed significantly.

The continuing decline in Aircraft orders is probably not good for areas of the country like Seattle that are centers for the aerospace industry. There is some comfort even there as full-year defense aircraft is just about the only area to show a gain. The pickup in core capital goods indicates that businesses are a little bit more willing to invest in their businesses overall. Perhaps soon they will start to invest in hiring people to run the tools they have started to buy again.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

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