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Economy in Brief

U.S. Factory Inventory Accumulation Continued
by Tom Moeller November 2, 2006

Factory inventories rose 0.6% last month. That matched the gain during July, which was upwardly revised, and it pulled the y/y change up to 7.4%, the fastest since early 2005.

Though petroleum inventories have fallen in recent months, higher prices have lifted the y/y gain to 15.7%. Despite this distortion, factory inventories less petroleum grew 7.0% y/y in September, the fastest since 2005.

Primary metals inventories rose another, firm 2.8% (16.3% y/y). Inventories of computers & electronic products actually fell slightly (9.3% y/y) after a strong 1.5% August increase and inventories of electrical equipment fell 0.3% (+11.6% y/y) after near 2% jumps during each of the prior three months. Machinery inventories spiked 1.4% (6.1% y/y).

Total factory orders recovered a strong 2.1% after an August dip. That strength reflected an 8.3% pop in durable goods orders which was little revised from the advance report and reflected higher aircraft orders. Factory orders less transportation fell 2.4% (+3.0% y/y), the weakness reflecting a 4.6% decline in nondurables and a 14.8% drop in petroleum.

Factory shipments fell 3.5% due to the drop in petroleum. Transportation shipments also collapsed 4.5% due to a 7.3% drop in autos. Still, factory shipments less transportation & petroleum fell 2.0% (+5.0% y/y) due to across the board declines.

Unfilled orders surged 3.9% due to the jump in civilian aircraft. Less the transportation sector altogether backlogs rose 1.2% (13.1% y/y).

Factory Survey (NAICS) September August Y/Y 2005 2004 2003
Inventories 0.6% 0.6% 7.4% 4.0% 6.9% -7.4%
New Orders 2.1% -0.3% 7.7% 8.5% 7.5% 0.9%
Shipments -3.5% 0.8% 2.4% 7.1% 6.8% 0.2%
Unfilled Orders 3.9% 0.5% 22.0% 16.3% 4.5% -1.0%
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