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Economy in Brief

U.S. Factory Inventory Accumulation Slowed
by Tom Moeller February 3, 2006

Factory inventories grew 0.5% during December following an upwardly revised 0.3% increase during November. During the year, the rate of inventory accumulation slowed to 4.3% from 7.7% during 2004.

The rise last year in oil prices actually dampened the degree of that slowdown. During 2005, petroleum refineries' inventories rose 26.0%. Less oil, factory inventories rose 3.4%, down from a 7.4% gain during 2004 and down from a 8.7% rate of accumulation early in the year.

December inventory accumulation was paced by a 0.8% (4.7% y/y) increase in primary metal which was the first monthly increase since May. Electrical equipment inventories also rose a strong 1.0% (5.7% y/y) but inventories of computers & electronic products fell 0.9% (0.5% y/y) and that y/y gain was down from +7.1% last January. Machinery inventories rose just 0.1% (6.4% y/y), half the annual rate of accumulation early in the year.

Factory shipments surged 2.2% but the gain was pumped by a 14.4% (83.8% y/y) rise in nondefense aircraft and a 4.2% (-0.2% y/y) gain in motor vehicles & parts. Less transportation altogether as well as petroleum, shipments rose 0.9% (5.1% y/y).

Total factory orders rose 1.1% and the advance report of a 1.3% rise in durable goods orders was revised up to 1.8%.

Unfilled orders surged another 2.4% powered by a 7.6% (55.8% y/y) rise in backlogs for nondefense aircraft orders. Less the transportation sector, backlogs rose 0.5% (10.0% y/y) and the ratio of total unfilled orders to shipments fell.

Factory Survey (NAICS) Dec Nov Y/Y 2005 2004 2003
Inventories 0.5% 0.3% 4.3% 4.3% 7.7% -1.1%
New Orders 1.1% 3.3% 10.5% 8.4% 9.3% 3.5%
Shipments 2.2% 0.8% 7.2% 7.4% 9.5% 1.5%
Unfilled Orders 2.4% 3.1% 16.3% 16.3% 8.4% 8.0%
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