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Economy in Brief

Mixed Factory Orders and Shipments Data
by Gerald D. Cohen  February 27, 2019

Manufacturers' orders edged up 0.1% (2.4% year-on-year) in December following a slightly upwardly-revised 0.5% decline in November (this report was delayed as a result of the government shutdown). The Action Economics Forecast survey looked for a 0.5% rise. Factory shipments shrank 0.2% (4.1% y/y), the third consecutive monthly decrease. Despite this weakness, shipments rose at a 0.8% annual rate in Q4 as strong August data created a healthy starting point for the quarter.

Orders in the volatile durable goods sector increased 1.2% (3.4% y/y) after a 0.9% gain in November. Orders for transportation equipment rose 3.2% (3.2% y/y) due to a 28.4% takeoff in volatile civilian aircraft bookings (-27.2% y/y). Total factory orders excluding transportation declined 0.6% (+2.2% y/y). Fabricated metal orders continued its strong quarter up 0.4% in December (6.0% y/y). Machinery orders decreased 1.0% (-0.4% y/y) after a 2.0% drop. Orders for computers & electronic products edged up 0.1% (7.8% y/y).

Shipments of durable goods grew 0.7% (6.9% y/y) in December. Shipments of transportation equipment increased 1.6% (12.2% y/y) driven by a 2.5% gain in passenger car and light trucks (15.4% y/y). Fabricated metal shipments increased 1.1% (7.2% y/y), while machinery declined 0.5% (+1.5% y/y). Computer & electronic product shipments rose 0.6% (7.0% y/y).

Nondurable goods shipments, which equal nondurable goods orders because nondurables are shipped in the same period they are ordered, declined 1.0% (+1.4% y/y). This decrease was driven a 5.5% drop in shipments from petroleum refineries (-2.7% 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 plummeted 15.1% in the year ending December. Orders for the largest nondurable category, basic chemicals, rose 0.3% (4.1% y/y), food products, the second largest, decreased 0.3% (0.6% y/y).

Unfilled orders of durable goods, which as implied above equals unfilled factory orders, edged down 0.1% (+3.8% y/y). Transportation equipment backlogs decreased 0.2% (+3.5% y/y). Excluding the transportation sector, unfilled orders inched up 0.1% (4.6% y/y). Non-transportation unfilled orders have been on a steady rise since early 2017. Computer & electronic sector backlogs increased 0.3% (3.8% y/y), while machinery declined 0.3% (+2.3% y/y).

Inventories of manufactured products were unchanged in December (3.4% y/y) as durable goods inventories - which are roughly 60% of total inventories - rose 0.3% (4.6% y/y). Transportation ticked down 0.1% (+2.7% y/y). Inventories outside of transportation were unchanged (3.5% y/y). The machinery sector rose 0.3% (5.0% y/y) and fabricated metals increased 0.2% (7.8% y/y). Nondurable goods inventories declined 0.4% (+1.6% y/y) as petroleum refineries dropped 5.2% (-7.9% y/y). Basic chemical inventories decreased 0.3% (+4.3% y/y), while food product inventories grew 0.4% (-1.8% 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 Dec Nov Oct Dec Y/Y 2018 2017 2016
New Orders 0.1 -0.5 -2.1 2.4 7.2 5.7 -2.9
Shipments -0.2 -0.5 -0.1 4.1 6.8 5.0 -3.2
Unfilled Orders -0.1 -0.2 -0.2 3.8 3.8 2.0 -1.2
Inventories 0.0 -0.1 0.2 3.4 3.4 4.5 -0.7
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