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Economy in Brief

Strong Factory Orders and Shipments Data
by Gerald D. Cohen  October 4, 2018

Manufacturers' orders jumped 2.3% (10.0% year-on-year) in August, following an upwardly revised 0.5% decline in July. Manufacturing shipments rose 0.5% (7.8% y/y), the 14 consecutive monthly increase.

Orders in the volatile durable goods sector surged 4.4% (11.8% y/y) after a 1.2% decline in July. Orders for transportation equipment soared 13.1% (20.7% y/y) due to a 69.1% takeoff in volatile civilian aircraft bookings (20.6% y/y). Total factory orders excluding transportation edged up 0.1% (7.8% y/y). Machinery orders declined 0.8% (+5.7% y/y) after a 0.4% increase. Orders for computers & electronic products decreased 0.3% (+6.9% y/y).

Shipments of durable goods grew 0.7% (7.5% y/y) in August. Shipments of transportation equipment increased 2.0% (8.0% y/y) reflecting an 18.2% jump in civilian aircraft & parts (0.6% y/y). Machinery shipments declined 0.6% (+5.9% y/y) reversing July's gain. Computer & electronic product shipments edged up 0.1% (6.5% y/y).

Nondurable goods shipments, which equal nondurable goods orders because nondurables are shipped in the same period they are ordered, rose 0.2% (8.1% y/y). While the largest nondurable category, food products, was flat (0.8% y/y), basic chemicals, the second largest, rose 0.4% (5.9% y/y). Shipments of petroleum & coal shipments edged down 0.1% (+27.5% y/y). Energy prices, in particular oil prices, have a significant role on the value of energy product activity in this report. West Texas intermediate oil prices were up 41.5% in the year ending August.

Unfilled orders of durable goods, which as implied above equals unfilled factory orders, increased 0.9% (4.9% y/y). Transportation equipment backlogs rose 1.2% (4.7% y/y). Excluding the transportation sector, unfilled orders gained 0.3% (5.4% y/y). Non-transportation unfilled orders have been on a steady rise since early 2017. Machinery backlogs edged up 0.1% (2.7% y/y), while the computer & electronic sector increased 0.2% (3.6% y/y).

Inventories of manufactured products edged down 0.1% (+5.1% y/y) as durable goods inventories--which are roughly 60% of total inventories--declined 0.3% (+4.7% y/y). Transportation fell 1.4% (+3.4% y/y). Inventories outside of transportation grew 0.2% (5.5% y/y). The machinery sector rose 0.5% (4.6% y/y). Computer & electronic product inventories declined 0.4% (+1.8% y/y). Nondurable goods inventories increased 0.3% (5.7% y/y). Basic chemical inventories, which have the largest nondurable inventories, rose 0.3% (4.6% y/y). Meanwhile, food product inventories, the second largest category, declined 0.2% (-0.4% y/y). Petroleum refinery inventories improved 1.1% (23.5% y/y).

All these factory sector figures and West Texas intermediate oil prices are available in Haver's USECON database.

Factory Sector (% chg) - NAICS Classification Aug Jul Jun Aug Y/Y 2017 2016 2015
New Orders 2.3 -0.5 0.6 10.0 5.7 -2.9 -8.2
Shipments 0.5 0.0 1.0 7.8 5.0 -3.2 -6.2
Unfilled Orders 0.9 0.1 0.4 4.9 2.0 -1.2 -2.7
Inventories -0.1 0.9 0.2 5.1 4.5 -0.7 -0.8
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