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Economy in Brief

U.S. Factory Inventory Gain Strong, Orders Reverse December Rise
by Tom Moeller March 6, 2008

Factory inventories surged 1.3% in January and posted the strongest m/m increase since early 2005. It followed an upwardly revised 0.9% December increase. Together the gains lifted the three month annualized rate of increase to 12.0%, up sharply from last year's lows which were at or below 1.0% through the Summer.

Excluding the volatile transportation sector where the aircraft industry can have an outsized effect on the total figures, the story of accelerated inventory accumulation isn't much different. Inventories rose the same 1.3% in January, the December rise was revised up, and the three month rate of accumulation was 9.6%, up from slight decumulation early last year. Inventories in the civilian aircraft industry rose 3.7% during January and the three month rate of gain was 51.3%.

Total factory orders fell 2.5% during January, pulled lower by a 30.4% m/m decline in orders for civilian aircraft (+86.7% y/y). Less that decline and less the transportation sector altogether, orders fell a slight 0.4% after a 0.6% December gain. The three month rate of increase at 6.9% was down from the double digit rates of increase seen last year. January orders for durable goods fell 5.1%, about the same as the advance report of a 5.3% decline.

Factory shipments surged 1.1%, again influenced by a strong aircraft industry where shipments rose 11.7% (19.1% y/y). Excluding the transportation sector shipments rose 0.8% and the three month rate of growth of 9.2% was down by half from last year's peak rates of gain.

Overall unfilled orders rose 0.7% in January and the three month rate of increase was a hefty 18.6%. Shipments of civilian aircraft & parts still can't keep pace with orders, therefore backlogs rose 1.4% after a 4.0% surge in December (45.0% y/y). Excluding the transportation sector altogether unfilled orders rose a lesser 0.4% during January and the three month average growth rate was a still firm 9.2% (AR).

Macroeconomic Interdependence and the International Role of the Dollar from the Federal Reserve Bank of New York is available here .

Factory Survey (NAICS, %) January December Y/Y 2007 2006 2005
Inventories 1.3 0.9 5.0 3.7 6.4 8.9
   Excluding Transportation 1.3 0.5 4.0 2.5 7.1 8.0
New Orders -2.5 2.0 7.7 1.4 5.1 11.6
   Excluding Transportation -0.4 0.6 8.0 1.2 5.4 11.5
Shipments 1.1 -0.4 7.1 1.1 4.3 10.3
   Excluding Transportation 0.8 -0.2 8.1 1.3 5.0 11.4
Unfilled Orders 0.7 2.5 18.3 18.1 20.0 15.0
  Excluding Transportation 0.4 1.3 8.6 9.1 14.1 8.4
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