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Economy in Brief

U.S. Factory Inventory Decumulation Rate Still Strong
by Tom Moeller November 03, 2009

Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications that it is. Factory inventories fell 1.0% during September, about as they did during the prior four months. Despite the strength of these declines, the 4.6% decline during the period is a clear moderation from the 6.5% rate during the five months through April.

The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment & appliances have fallen at a reduced 6.6% rate during the period but decumulation of machinery inventories continued firm at a 7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate of decumulation of primary metals inventories also slowed as did cuts of motor vehicle & parts inventories. Inventory reductions of computers & electronic products continued firm but it may have bottomed.

Factory shipments have started to rise moderately. On a three-month basis they're up at a 3.5% rate after the 40% plus rates of decline last Winter. Shipments of primary metals have firmed to a 52.5% growth rate over the last three months and computers & electronics shipments rose at a 4.7% rate. Shipments of transportation equipment rose at a 25.1% rate led by a surge in shipments of nondefense aircraft & parts. Shipments of basic chemicals also turned up as did shipments from textile mills. The shipments improvement has caused unfilled orders to fall at a much-reduced 3.9% rate through September.

Overall, the reduction of inventories in the factory sector has succeeded in lowering the inventory-to-sales ratio. The decline to 1.36 was to its lowest level since October of last year and down from the recent peak of 1.46.

Finally, new orders have improved. The 0.9% increase during September raised orders at a 6.0% rate during the last three months. It reflected improvement in orders for transportation equipment, machinery, primary metals and electrical equipment.

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

Factory Survey (NAICS, %) September August Y/Y 2008 2007 2006
Inventories -1.0 -0.9 -11.8 2.1 3.7 8.2 
   Excluding Transportation -0.7 -0.4 -14.1 -0.6 2.7 7.9
New Orders 0.9 -0.8 -17.1 0.1 1.9 6.2
   Excluding Transportation 0.8 0.3 -15.7 3.1 1.2 7.4
Shipments 0.8 -0.2 -15.9 1.7 1.2 5.9
   Excluding Transportation 0.1 -0.1 -16.5 3.7 1.5 6.7
Unfilled Orders -0.4 -0.4 -11.5 3.5 17.1 15.3
  Excluding Transportation 0.5 -0.1 -14.2 -1.0 8.2 16.0
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