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Economy in Brief

U.S. Factory Inventories Continue To Accumulate
by Tom Moeller March 31, 2010

In what probably is a voluntary trend, factory inventories are accumulating. Manufacturers raised inventory levels by 0.5% last month after a 0.3% gain during January. The increase was part of a trend that has raised inventories by 0.6% during the last three months after an 8.7% drop during all of 2009. Much of that reversal reflects the upturn in oil prices which has raised inventory values held at refineries by 40.9% y/y. Excluding oil, factory inventories nevertheless rose 0.3% in February. A slight decline during the last three months contrasts with a 10.3% rate of decumulation last year. Machinery inventories slipped 0.1% and by 1.5% during the last three months versus a 13.6% decline last year. Electrical equipment inventories were roughly unchanged for the month. Their 0.3% three-month decline reverses an 18.1% drop last year. Similarly, inventories of computers & electronic products rose 0.6% and by 0.8% during the last three months after a 9.1% decline in 2009.

Factory orders rose 0.6% last month and by 4.6% since November after a 17.2% drop during 2009. However, the latest gain also was increased by higher oil prices. Excluding oil (where orders equal shipments), orders still were firm and rose 0.9% (7.0% y/y) after a 2.5% January increase. Orders for primary metals have been notably strong and were up by one-third y/y. Machinery orders rose 5.1% last month and their three-month change of 1.6% compares to a 25.0% drop last year. Electrical equipment orders remain under some pressure but the 3.0% decline since November is slower than a 19.2% drop during all of last year. Orders for computers & electronic products rose 1.4% during the last three months after a moderate 7.6% decline last year.

Factory shipments slipped 0.1% last month after a modest January gain. Nevertheless, the three-month gain of 2.3% follows a 15.2% drop last year. Higher oil prices played a role in the turnaround. Yet excluding oil, shipments rose 2.2% over the last three months after a 12.2% decline last year. Machinery shipments staged a reversal of 1.4% since November after the 20.1% decline in 2009. Also, a 0.4% three-month slip in shipments of electrical equipment compares to an 18.5% drop last year. Primary metals shipments increased 2.3% in February and by 10.8% since November with higher prices. Furniture shipments rose a modest 1.1% since November after the 18.9% drop last year.

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

Factory Survey (NAICS, %) February January December Y/Y 2009 2008 2007
Inventories 0.5 0.3 -0.2 -5.6 -8.7 2.2 3.7
   Excluding Transportation 0.6 0.2 -0.1 -5.9 -9.2 -0.5 2.7
New Orders 0.6 2.5 1.5 10.5 -17.2 0.0 1.9
   Excluding Transportation 0.7 0.5 1.5 9.2 -15.8 3.0 1.2
Shipments -0.1 0.7 1.8 6.1 -15.2 1.6 1.2
   Excluding Transportation 0.3 1.0 1.3 7.1 -15.3 3.5 1.5
Unfilled Orders 0.5 0.2 -0.9 -6.5 -10.2 3.4 17.1
  Excluding Transportation 0.3 0.1 0.4 -3.6 -8.4 -1.4 8.2
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