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Economy in Brief

U.S. Factory Inventories & Shipments Increase Again
by Tom Moeller January 5, 2010

For the second straight month factory inventories increased, a turn following thirteen consecutive months of decline. Moreover, October gains were revised up slightly. The latest monthly increase owed largely to a 3.8% jump (-26.5% y/y) in auto inventories which was the second consecutive month of strong gain. That rise was offset by a 1.9% drop (+6.0% y/y) in defense aircraft and a 0.3% slip (+2.4% y/y) in nondefense aircraft inventories. Elsewhere, the inventory turn has been limited to the metals and petroleum industries along with higher prices.

Apparel inventories (-18.6% y/y) continued their decline of more than a year as did machinery inventories (-13.3% y/y), though the latter's decline has slowed significantly. Electrical equipment inventories (-18.9% y/y) also continued to fall but, again, the monthly rates of decline have slowed as they have for computers & electronic products (-9.9% y/y).

Higher factory shipments are likely to encourage the holding and/or building of inventories. Shipments rose 1.0% during November for the third straight month of strong increase. Shipments of electrical equipment shipments (-9.2% y/y) have been strong for two months as have machinery shipments (-20.3% y/y) for two of the last three. Primary metals (-16.6% y/y) have shown notable monthly increases since May and furniture inventories (-14.5% y/y) also seem to have turned toward accumulation.

Improved factory new orders are part of the sector's improvement. They rose 1.1% in November, in part reflecting the strength in petroleum prices. A 0.5% monthly increase had been expected. Elsewhere, metals orders (-7.3% y/y) have improved as have orders for machinery (-14.2% y/y) and computers (-2.4% y/y). New orders for electrical equipment & appliances have perhaps turned the most, moving to a 0.7% y/y gain from a 30.5% decline as of June.

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

The Economic Outlook is yesterday's speech by Fed Governor Elizabeth A. Duke and it can be found here

Factory Survey (NAICS, %) November October September Y/Y 2008 2007 2006
Inventories 0.2 0.6 -1.3 -10.3 2.1 3.7 8.2 
   Excluding Transportation 0.3 0.5 -1.0 -11.8 -0.6 2.7 7.9
New Orders 1.1 0.8 1.6 -3.2 0.1 1.9 6.2
   Excluding Transportation 1.9 1.0 1.5 -2.1 3.1 1.2 7.4
Shipments 1.0 1.5 1.3 -3.8 1.7 1.2 5.9
   Excluding Transportation 1.3 2.2 0.6 -3.6 3.7 1.5 6.7
Unfilled Orders -0.7 -0.6 -0.4 -10.9 3.5 17.1 15.3
  Excluding Transportation 0.2 -0.4 0.6 -11.3 -1.0 8.2 16.0
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