The plunge in durable goods orders in January is entirely due to volatility in transportation. The underlying details of this report are much stronger than the headline.

To put it mildly, durable goods orders have been all over the map but the trend appears to be slowing.

The question is -- and this is why the market hasn't reacted too negatively to the durable goods report -- is whether businesses ... will continue to spend given the risks to consumer spending posed by high energy prices.

Durable goods was June data, and what we really care about is July data, ... There is also this bearish impulse to the market, because people are looking ahead to next week.

The underlying details of this report paint a stronger picture of the manufacturing sector, as evidenced by the robust growth rate of orders excluding transportation over the last three months.

Although we expect consumer spending to slow sharply in the fourth quarter, to below 2 percent, as a result of lower auto sales, we expect that GDP will still edge back above 4 percent on an inventory rebound, higher business spending, and hurricane recovery spending.