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Economy in Brief

U.S. Factory Sector Activity Weakens and Inventories Rise
by Tom Moeller  November 4, 2019

Factory orders fell 0.6% (-3.5%) in September following an unrevised 0.1% August dip. A 0.5% decline had been expected in the Action Economics Forecast Survey. Orders for durable goods fell 1.2% (-5.5% y/y), revised from the advance 1.1% shortfall. Leading the slide was an 11.8% drop in orders for nondefense aircraft. Orders for computers & electronic products also fell 1.2% (-0.3% y/y), but machinery orders gained 0.2% (-1.4% y/y). The new news in this report was that factory orders for nondurable goods, which equal shipments, rose a minimal 0.1% (-1.3% y/y). Overall nondurable goods were held back by a 0.5% decline (-3.8% y/y) in orders to textile mills. Textile product orders also fell 0.2% (-3.0% y/y). To the upside, chemical orders rose 0.2% (2.4% y/y) and paper product orders edged 0.1% higher (0.2% y/y) for the third month in the last four. Petroleum refinery orders gained 0.2% (-12.3% y/y).

Factory sector shipments overall eased 0.2% (-1.2% y/y) led by a 0.5% decline in durable goods shipments. That reflected a 3.4% fall (-5.0% y/y) in auto shipments, which were down sharply for the third straight month. Computer & electronic product shipments eased 0.4% (+1.9% y/y), off for the fourth consecutive month. These declines were accompanied by a 1.4% fall (-0.0% y/y) in shipments for machinery which roughly equaled the declines during the prior two months. Offsetting these declines was a 0.8% rise (2.1% y/y) in shipments of electrical equipment after falling for two straight months. Primary metals shipments rose 1.3% (-5.6% y/y) and fabricated metals shipments improved minimally (2.4% y/y).

Inventories in the manufacturing sector increased 0.3% following a 0.1% August decline. A 0.1% rise had been expected. The y/y increase decelerated to 2.6% from its peak of 5.8% in July of last year. A 1.5% increase (11.7% y/y) in transportation sector inventories led the rise. Auto inventories jumped 3.0% (24.3% y/y) and have risen strongly in all but one month this year. Nondefense aircraft inventories rose 2.1% (15.9% y/y). Outside the transportation sector, inventories held steady (0.4% y/y) following five straight months of decline. Inventories of computers & electronic products rose 0.4% (0.3% y/y) while machinery inventories were little changed (3.7% y/y). Inventories of nondurable goods edged 0.1% higher, but fell 0.7% y/y. Textile inventories rose 0.5% (-0.5% y/y). Basic chemical inventories rose 0.5% (1.4% y/y). Paper product inventories were off 0.2% (+1.7% y/y) and petroleum refinery inventories fell 0.9% (-11.1% y/y).

The level of unfilled orders in the factory sector held steady (-1.8% y/y) after two months of 0.1% increase. Outside of the transportation sector, order backlogs also remained unchanged (0.5% y/y). Machinery backlogs held steady (-3.2% y/y) while unfilled orders for computers & electronic product were similarly unchanged. Electrical equipment backlogs rose 0.2% (2.2% y/y) and unfilled orders of transportation equipment were unchanged (-2.8% y/y).

The factory sector figures are available in Haver's USECON database. The expectation figure is in the AS1REPNA database.

Factory Sector (% chg) - NAICS Classification Sep Aug Jul Sep Y/Y 2018 2017 2016
New Orders -0.6 -0.1 1.4 -3.5 7.3 5.7 -2.9
Shipments -0.2 -0.3 -0.3 -1.2 6.9 5.0 -3.2
Unfilled Orders -0.0 0.1 0.1 -1.8 3.9 1.9 -1.1
Inventories 0.3 -0.1 0.1 2.6 3.5 4.5 -0.7
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