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Economy in Brief

U.S. Factory Inventories Began to Rebuild
by Tom Moeller August 30, 2005

Factory inventories rose 0.5% in July, the most for any one month since February. The rise, however, was very much a function of the 5.9% (19.2% y/y) jump in inventories at petroleum refineries. Nevertheless, less petroleum factory inventories rose 0.2%, the first monthly rise since March. Benchmark revisions made on August 19th extended back to 1992 and generally lowered the level of factory inventories.

A 1.5% (10.2% y/y) rise in machinery inventories led last month's accumulation and it was the strongest monthly gain since January. That was accompanied by a 0.8% (-1.1% y/y) rise in computer inventories and a 0.4% (4.7% y/y) gain in the electrical equipment industry.

Factory shipments surged 0.7%, but again the strength of the gain reflected higher oil prices. Less a 6.4% jump in shipments from petroleum refineries, factory shipments rose just 0.3% (4.8% y/y) following a 0.3% decline in June. Strength concentrated in the electrical equipment industry where shipments rose 1.0% (5.0% y/y) and in the computer industry where shipments rose 0.4% (8.3% y/y). Machinery shipments fell 0.1% (+4.9% y/y).

Factory sector orders fell 1.9% reflecting an unrevised advance report of a 4.9% decline in durables orders which were down due to lower aircraft orders.

Unfilled orders surged another 1.0% and again reflected higher backlogs of nondefense aircraft & parts (28.4% y/y), but industry gains elsewhere were broad based. The ratio of unfilled orders to shipments outside of transportation dipped slightly but remained elevated versus the lows of earlier this year.

Factory Survey (NAICS) July June Y/Y 2004 2003 2002
Inventories 0.5% 0.1% 6.0% 7.7% -1.1% -5.4%
New Orders -1.9% 0.9% 6.3% 9.3% 3.5% -2.5%
Shipments 0.7% 0.0% 6.6% 9.5% 1.5% -2.5%
Unfilled Orders 1.0% 2.8% 8.9% 8.4% 8.0% -8.5%
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