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Economy in Brief

U.S. Factory Inventories Up With Oil Prices
by Tom Moeller August 4, 2008

Factory inventories surged 1.0% during June, thanks to the surge in oil prices. The value of inventories at petroleum refineries rose 9.5% (37.2% y/y) in June and the value is up by more than one-half since December as prices have surged. Less petroleum, factory inventories rose 0.4% (5.1% y/y) in June and YTD they rose 4.6%.

Less oil, the rate of inventory slowed. Automobile inventories fell at a 31.7% annual rate during the last three months. Inventory accumulation in the machinery sector also dropped to a 1.8% growth rate. Accumulation in the computer & electronics areas fell as well to a 1.0% rate of growth.

Factory shipments also surged, by 1.6%, due to oil. Shipments of petroleum surged by 5.6% (52.5% y/y). Less petroleum shipments rose (2.2% y/y) after a 0.5% May decline.

Total factory orders jumped by 1.7%, which was double expectations, again reflecting stronger petroleum orders (which equal shipments). Less petroleum, shipments did surge 1.0% (1.8% y/y) though the gain was making up for weakness earlier this year. Durable orders rose 0.8% which was the same as reported in the advance report, after a 0.1% May uptick.

Overall unfilled orders rose 0.9%, the same as they did in May. Order backlogs for civilian aircraft, which have been rising at a 25.3% rate, have started to cool. They were up just 0.4% in June Excluding the transportation sector altogether unfilled orders still rose 1.2% in June and at a 12.8% rate during the last three months. Accelerated growth in backlogs of machinery still account for much of that strength.

Factory Survey (NAICS, %) June May Y/Y 2007 2006 2005
Inventories 1.0 0.6 7.0 3.7 6.4 8.9
   Excluding Transportation 1.0 0.5 5.9 2.7 7.9 8.1
New Orders 1.7 0.9 7.1 1.9 6.2 11.9
   Excluding Transportation 2.3 0.8 11.7 1.2 7.4 11.7
Shipments 1.6 0.3 7.5 1.2 5.9 10.4
   Excluding Transportation 1.6 0.9 10.1 1.5 6.7 11.4
Unfilled Orders 0.9 0.9 15.3 17.1 15.3 15.4
  Excluding Transportation 1.2 0.7 10.1 8.2 16.0 9.2
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