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Economy in Brief

U.S. Factory Inventories Lower Still
by Tom Moeller February 5, 2009

The correction of factory inventory levels has picked up steam. In December, the 1.4% decline followed a 0.5% November drop that was roughly double the initial estimate of -0.3%. On a three-month basis, the rate of decline accelerated to 9.7%. To be sure, these figures have been influenced by the decline in oil prices. However, a broad-based inventory correction in the factory sector still is underway. Less oil, factory inventories fell 0.5% during December. That lowered the three-month change to a negative 0.6% (AR) after 8% rates of growth earlier in 2008.

The commercial aircraft industry continued to dominate the nonoil industry figures with a positive 45.6% year-to-year growth rate. To the downside, automobile inventories have been reduced by 8.7% versus last year. Electrical equipment & appliance inventories grew at a 0.5% rate in December versus double-digit growth early in 2007 and growth in machinery inventories has been nearly halved to 6%. Steep production cutbacks pulled furniture inventories down 5.2%. The computer industry bucked the trend and inventories rose at a 6.8% rate last year versus slight decumulation in 2007.

Total factory orders dropped sharply again in December. The 3.9% decline was the fourth in a row between -3% and -7%, but that reflected the drop in oil prices (orders here equal shipments). Textile mill orders fell 4.2% (-18.2% y/y) and apparel orders fell 3.1% y/y. Orders for durable goods orders fell 3.0% reflecting the 43.8% drop in commercial aircraft orders. Less commercial aircraft, orders for durable goods fell 1.9% or 16.0% y/y.

Factory shipments dropped 2.9% due to lower oil prices. Less oil, shipments fell a lesser 1.3% but year-to-year they were down sharply by 7.4%. Automobile shipments were off by more than one quarter year-to-year and shipments of electrical equipment were off 9.7%. Electronic computer shipments fell 29.1% y/y with lower prices while shipments of furniture & related products fell 12.5%.

Total unfilled orders fell 1.4%, but less the transportation sector where aircraft backlogs still are strong, unfilled orders fell 2.2%.

Why Do Firms Use Temporary Workers? from the Federal Reserve Bank of Chicago is available here.

Factory Survey (NAICS, %) December November Y/Y 2008 2007 2006
Inventories -1.4 -0.5 2.6 2.6 3.7 8.2 
   Excluding Transportation -2.3 -1.1 -0.0 -0.0 2.7 7.9
New Orders -3.9 -6.5 -18.7 0.2 1.9 6.2
   Excluding Transportation -4.4 -6.0 -15.2 3.2 1.2 7.4
Shipments -2.9 -6.5 -12.8 1.8 1.2 5.9
   Excluding Transportation -3.5 -6.8 -12.2 3.7 1.5 6.7
Unfilled Orders -1.4 -0.9 3.7 3.7 17.1 15.3
  Excluding Transportation -2.2 -1.4 -0.6 -0.6 8.2 16.0
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