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Economy in Brief

U.S. Factory Inventory Level Continued Higher
by Tom Moeller October 2, 2008

Factory inventories increased another 0.6% during August, the same as during July. That lifted the y/y gain to 8.6%, its strongest since late 2006. Growth in inventories within the transportation sector has been strong at 14.6% y/y. Yet less the transportation sector inventory growth similarly was firm. The y/y gain of 7.5% was the strongest since late 2006.

Inventories of transportation equipment has been notable at 14.6% y/y led by a 32.6% bulge in inventories of nondefense aircraft & parts. Defense aircraft inventories also were strong and posted a 12.9% jump. Automobile inventories fell 6.0% y/y and light truck inventories were off 15.4%. Growth in inventories of primary metals also has been notable at 11.9% y/y while fabricated metals inventories rose 8.0%. Electrical equipment & appliance inventories grew a stable 5.4% while growth in machinery inventories also was stable at 6.4%.

Total factory orders fell 4.0% during August versus expectations for a 2.4% drop. The decline reflected the already reported 4.8% shortfall in durable goods orders. They were pulled lower by a 9.1% decline in new orders for transportation equipment.

Factory shipments similarly dropped 3.5%, led by an 8.0% (-15.5% y/y) drop in transportation sector shipments. Shipments of electrical equipment also were weak and they posted a 4.6% (-1.2% y/y) decline. Electronic computer shipments fell 3.3% (-11.8% y/y) as did shipments of furniture & related products (-6.4% y/y). Shipments from petroleum refineries were weak last month and posted a 9.1% drop with lower prices. Year-to-year, however, they were still up 49.6%.

Overall unfilled orders rose 0.4% and 12.9% y/y. Much of the strength over the last year has been due to the 24.5% gain in order backlogs of nondefense aircraft & parts. Order backlogs for electronic computers fell slightly but order backlogs of machinery surged (23.2% y/y).

The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia is available here.

Factory Survey (NAICS, %) August July Y/Y 2007 2006 2005
Inventories 0.6 0.6 8.6 3.7 6.4 8.9
   Excluding Transportation 0.6 0.5 7.5 2.7 7.9 8.1
New Orders -4.0 0.7 4.2 1.9 6.2 11.9
   Excluding Transportation -3.3 0.5 8.4 1.2 7.4 11.7
Shipments -3.5 1.4 5.3 1.2 5.9 10.4
   Excluding Transportation -2.9 1.3 8.7 1.5 6.7 11.4
Unfilled Orders 0.4 0.8 12.9 17.1 15.3 15.4
  Excluding Transportation 0.2 0.9 9.3 8.2 16.0 9.2
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