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Economy in Brief

U.S. Factory Inventories Turn Up in October; Sizable Across-the-Board Revisions to September Factory Data
by Carol Stone December 04, 2009

Factory inventories rose in October, by 0.4%, their first increase in 14 months. September's decline was revised from 1.0% to 1.3%, although this revision can actually be interpreted positively. Shipments in September were stronger than initially reported, gaining 1.3% instead of the 0.8% indicated a month ago. Thus, inventories decreased more then for the right reason: sales increased. Shipments continued upward in October by 0.8%. The resulting inventory/shipments ratio, which reached a 13-year high last winter of 1.46, continued to decline most recently, edging down from 1.35 in September to 1.34 in October.

As our graph at left depicts, the uptick in October inventories was accounted for by the petroleum industry, as industries excluding that one had virtually flat stocks from September. This remains an obvious improvement, though, as the graph illustrates. Industries with increases in October include aircraft, various defense-related sectors and food; the petroleum sector saw a 6.1% rise in stocks, which we presume was heavily price-driven.

New orders continued to improve as well. Durable goods orders were down 0.6%, as Tom Moeller reported here a week ago. But revisions to September data were themselves increased in this latest report, so that total durable goods are now shown to have increased 2.2% compared to 2.0% a week ago, with the segment excluding transportation equipment up 2.1%, compared with 1.8%. Also, nondurable goods industries saw a 1.6% expansion in October, and their September results were revised notably higher, from 0.6% to 1.1%.

So the manufacturing sector is regaining its footing after a long contraction. These gains in orders, shipments and inventories, though still uneven among individual industries, suggest a broadening of an emerging economic recovery.

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

Factory Survey (NAICS, %) October September August Y/Y 2008 2007 2006
Inventories 0.4 -1.3 -0.9 -11.2 2.1 3.7 8.2 
   Excluding Transportation 0.2 -1.0 -0.4 -13.2 -0.6 2.7 7.9
New Orders 0.6 1.6 -0.8 -10.6 0.1 1.9 6.2
   Excluding Transportation 0.5 1.5 0.3 -10.2 3.1 1.2 7.4
Shipments 0.8 1.3 -0.2 -11.5 1.7 1.2 5.9
   Excluding Transportation 1.5 0.6 -0.1 -11.8 3.7 1.5 6.7
Unfilled Orders -0.4 -0.4 -0.4 -10.9 3.5 17.1 15.3
  Excluding Transportation -0.2 0.6 -0.1 -12.6 -1.0 8.2 16.0
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