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Economy in Brief

U.S. Factory Inventory Decumulation Rate Eases Further
by Tom Moeller September 2, 2009

Inventories still are being shed, but at a somewhat slower rate. That is a part of the recent improvement in the level of factory sector output. Manufactures' inventories during July fell 0.7% after a June decline that was revised deeper to 1.1%. These still-significant declines are behind an easing of the decumulation rate to 10.0% from 15.9% this past Winter. Much of that deceleration is due, however, to lower oil prices. Nevertheless, excluding oil, factory inventories fell at a 12.2% three-month rate that was a slight moderation from 14.3% earlier.

The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment & appliances have fallen at a reduced 14.7% rate and machinery inventories fell at a still-firm 18.7% rate. Conversely, steep production cuts lowered furniture inventories at a 25.7% rate which was only slightly reduced. Inventories of primary metals also fell at a fairly stable 31.3% pace and computer inventory decumulation accelerated to a 18.1% rate during the last three months.

Factory shipments have started to rise moderately. On a three-month basis they're up at a 7.0% rate after the 40% plus rates of decline last Winter. The rate of decline in the machinery industry slowed to 3.1% after dropping at a 52.7% rate in March While in the electrical equipment sector the rate of decline slowed to 7.1% from 48.8%. Most elsewhere the rates of decline in shipments moderated substantially.

Finally, new orders have improved. The 1.3% increase during July was the fifth increase this year. It reflected a sharp monthly rise both in primary metals (-45.0% y/y) and electrical equipment (-20.2% y/y). Unfilled orders also fell at a sharply reduced 4.4% rate through July.

The Manufacturers' Shipments, Inventories and Orders (MSIO) data is available in Haver's USECON database.

Cross-Country Causes and Consequences of the 2008 Crisis: Early Warning from the Federal Reserve Bank of San Francisco can be found here.

Factory Survey (NAICS, %) July June Y/Y 2008 2007 2006
Inventories -0.7 -1.1 -10.0 2.1 3.7 8.2 
   Excluding Transportation -1.1 -1.4 -13.1 -0.6 2.7 7.9
New Orders 1.3 0.9 -23.2 0.1 1.9 6.2
   Excluding Transportation -0.7 2.7 -23.2 3.1 1.2 7.4
Shipments -0.0 1.8 -22.2 1.7 1.2 5.9
   Excluding Transportation -0.1 1.9 -22.4 3.7 1.5 6.7
Unfilled Orders -0.0 -0.8 -10.1 3.5 17.1 15.3
  Excluding Transportation -0.3 -0.1 -14.9 -1.0 8.2 16.0
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