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Economy in Brief

U.S. Factory Inventories Turn Toward Accumulation
by Tom Moeller March 4, 2010

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Improved demand has changed attitudes about holding inventory. Factory inventories increased 0.2% during January and have risen during three of the last four months. That compares with sharp declines during the twelve months through September which lowered inventory levels by 11.9%. Even accounting for higher oil prices there has been a turn. Without oil refineries factory inventories were roughly unchanged during the last four months and the -0.6% three-month change compares to -3.8% at its depth early last year.

Primary metals inventories during the last three months rose 3.1% after a 10.2% decline one-year ago. Electrical equipment inventories fell 0.8% after a 7.2% decline at its deepest last March and machinery inventories fell 1.8% versus at a 5.2% decline at the deepest last Spring. Even furniture inventories went down at a slower 2.5% three-month rate. In the nondurable area apparel inventories fell at a lessened 1.3% rate while paper products fell 1.7% versus -6.1% one year ago.

Higher factory shipments have encouraged the turn. Shipments rose 0.3% during January following four months of strength. Here again rising oil prices played a role. But even excluding oil, an unchanged January reading followed four months of strength. The three-month change has shifted to positive 2.4% from -9.4% one year ago. Shipments of machinery, electrical and transportation equipment have led the turn.

Factory Survey (NAICS, %) January December November Y/Y 2009 2008 2007
Inventories 0.2 -0.2 0.2 -7.5 -8.7 2.2 3.7
   Excluding Transportation 0.1 -0.1 0.3 -8.1 -9.2 -0.5 2.7
New Orders 1.7 1.5 1.0 9.5 -17.2 0.0 1.9
   Excluding Transportation 0.1 1.5 2.1 8.9 -15.8 3.0 1.2
Shipments 0.3 1.8 1.6 5.5 -15.2 1.6 1.2
   Excluding Transportation 0.8 1.3 1.7 6.2 -15.3 3.5 1.5
Unfilled Orders 0.0 -0.9 -0.7 -8.5 -10.2 3.4 17.1
  Excluding Transportation -0.0 0.4 0.2 -6.0 -8.4 -1.4 8.2
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