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Economy in Brief

U.S. Factory Inventories Fell Again
by Tom Moeller December 4, 2008

Factory inventories dropped again in October. The 0.6% m/m decline followed a 0.8% slide during the month prior. They were the first back-to-back monthly declines since 2003. Inventories in the transportation sector have been rising as production cutbacks have not kept pace with lower demand. Less the transportation sector, inventories fell 1.0% after a 0.9% September decline.

Inventories of transportation equipment rose 1.6% (15.1% y/y) due to the 1.8% backup in automobile inventories (0.7% y/y) which followed a 2.6% September jump. Light truck inventories also rose 1.6% but they were off by nearly one quarter from last October. Growth in inventories of commercial aircraft continued to dominate the figures, however, and they rose 2.8% during October and they're up by more than one-third y/y. Electrical equipment & appliance inventories fell 0.7% and reversed a like increase during September (+5.1% y/y) while machinery inventories rose a firm 0.2% (5.5% y/y).

Total factory orders fell 5.1% during October which was larger than Consensus expectations for a 3.9% drop. The decline reflected a 6.9% plummet in durable goods orders which was a slightly steeper decline than indicated in the advance report. Orders were pulled lower by an 11.2% decline in new orders for transportation equipment.

Factory shipments dropped 3.2%, about the same as reported for September. Shipments of transportation equipment fell 5.2% as commercial aircraft shipments plunged 10.1% (-22.1% y/y). Shipments of electrical equipment also were weak and they posted a 4.6% (-1.2% y/y) decline. Electronic computer shipments fell for the third straight month (-1.8% y/y) and shipments of furniture & related products fell an even harder 4.1% (-11.3% y/y). Shipments from petroleum refineries were quite weak last month (-13.0%) as oil prices fell and they are off 4.1% y/y.

Factory Survey (NAICS, %) October September Y/Y 2007 2006 2005
Inventories -0.6 -0.8 6.2 3.7 6.4 8.9
   Excluding Transportation -1.0 -0.9 4.6 2.7 7.9 8.1
New Orders -5.1 -3.1 -5.3 1.9 6.2 11.9
   Excluding Transportation -4.2 -4.3 -2.5 1.2 7.4 11.7
Shipments -3.2 -3.1 -2.3 1.2 5.9 10.4
   Excluding Transportation -2.9 -3.8 -0.3 1.5 6.7 11.4
Unfilled Orders -0.6 0.2 10.0 17.1 15.3 15.4
  Excluding Transportation -1.6 -0.6 5.2 8.2 16.0 9.2
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