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Economy in Brief

U.S. Factory Inventories Fell Again
by Tom Moeller January 6, 2009

Factory inventories fell in November. The decline of 0.3%, along with those during prior months, was disproportionately influenced by the decline in oil prices. Less oil, inventories rose 0.2% after a 0.4% October gain. Moreover, the year-to-year change in nonpetroleum inventories has held constant near 6.0%. Evidence of a change in the management of factory sector inventories is, however, evident in the more recent figures. The three-month change in nonpetroleum inventories has been reduced, as a result of production cuts, to 1.5% from its recent high of 9.0%.

Again, one industry recently has dominated even the nonoil figures. Growth in inventories of commercial aircraft has been running at a near-40% year-to-year rate. Less commercial aircraft production cutbacks have reduced factory inventory growth to 1.6% y/y from the high early in 2007 near 10.0%. Automobile inventories have been reduced by 7.8% versus last year. Electrical equipment & appliance inventories have been growing at a 2.0% rate versus double-digit growth early in 2007 and growth in machinery inventories has been nearly halved to 6%.

Total factory orders fell 4.6% during November but the figure very much reflected the decline in oil prices (orders here equal shipments.) Orders for durable goods orders fell 1.5% and that very much reflected, as it did in the advance report, the 37.7% drop in commercial aircraft orders. Less commercial aircraft, orders for durable goods fell 9.0% y/y, down from a high rate of accumulation near 10%.

Factory shipments dropped 5.3% due to lower oil prices. Less oil, shipments fell a somewhat lesser 3.4% but they still were down 5.6% y/y. Shipments of transportation equipment fell 18.6% y/y as commercial aircraft shipments plunged 28.9% y/y and automobile shipments fell 21.9%. Shipments of electrical equipment were off 8.6% y/y) and electronic computer shipments fell 31.7% y/y with lower prices. Shipments of furniture & related products fell a hard 12.6% y/y.

Unfilled orders fell 0.6% and the y/y gain of 7.9% is down from the peak near 20%. Less transportation unfilled orders grew 3.4% y/y versus a peak of 16% in 2006.

The minutes to the latest FOMC meeting can be found here.

Factory Survey (NAICS, %) November October Y/Y 2007 2006 2005
Inventories -0.3 -0.6 5.1 3.7 6.4 8.9
   Excluding Transportation -0.9 -1.0 3.1 2.7 7.9 8.1
New Orders -4.6 -6.0 -12.2 1.9 6.2 11.9
   Excluding Transportation -4.2 -5.1 -9.1 1.2 7.4 11.7
Shipments -5.3 -3.6 -9.6 1.2 5.9 10.4
   Excluding Transportation -5.5 -3.4 -8.2 1.5 6.7 11.4
Unfilled Orders -0.6 -0.9 7.9 17.1 15.3 15.4
  Excluding Transportation -0.9 -2.0 3.4 8.2 16.0 9.2
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