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Economy in Brief

U.S. Factory Activity Sector Activity Weakens Substantially
by Tom Moeller  May 4, 2020

• Factory orders decline led by durable goods.

• Shipments & unfilled orders drop markedly as well.

• Inventory liquidation progresses.

Mirroring the weakness reported last month for durable goods orders and industrial production, each component of factory sector activity declined in March. Factory orders dropped 10.3% (-11.4% y/y) during March following a little-revised 0.1% February dip. A 9.7% decline had been expected in the Action Economics Forecast Survey. Durable goods orders declined 14.7% (-16.2% y/y), revised from -16.2% in the advance report, following a 0.1% easing. A 41.3% decline (-43.9% y/y) in orders for transportation equipment was led by a record collapse in civilian aircraft bookings. Excluding the transportation sector altogether, factory sector orders fell 3.7% (-4.3% y/y), the third consecutive monthly decline. Primary metals orders weakened 2.8% (-8.1% y/y) and machinery orders eased 0.5% (-1.5% y/y). Orders for nondurable goods, which equal shipments, collapsed 5.8% (-6.5% y/y), led by a one-third drop in the value of petroleum products. Basic chemical shipments eased 0.3% (+1.1% y/y) and apparel shipments declined (-1.9% y/y). Textile product shipments were off 1.8% (-7.9% y/y).

Shipments of durable goods fell 4.7% (-6.6% y/y) as transportation shipments weakened 13.0% (-17.4% y/y). Shipments outside of the transportation sector fell 3.6% (-4.2% y/y). Machinery shipments dipped 0.3% (-2.9% y/y) but electrical equipment & appliance shipments improved 1.3% (3.7% y/y), a second straight month of strong increase. Transportation sector shipments collapsed 13.0% (-17.4% y/y) as auto shipments fell by one-third (-36.8% y/y). Nondefense aircraft shipments rose 13.1% though they remained down 20.5% y/y. Shipments of computers & electronic products eased 0.2% (+0.2% y/y).

Unfilled orders for manufactured products fell 2.0% (-3.8% y/y). Transportation sector backlogs declined 2.9% (-5.3% y/y). Excluding transportation, unfilled orders eased 0.2% (-0.5% y/y). Machinery backlogs held steady (-3.0% y/y) while computer & electronic equipment order backlogs rose 0.1% (0.5% y/y). Electronic equipment & appliance order backlogs strengthened 0.2% (7.0% y/y).

Factory sector inventories declined 0.8% (+0.3% y/y), the largest of three straight monthly declines. Transportation equipment inventories rose 0.6% (13.4% y/y). Excluding the transportation sector, inventories declined 1.2% (-2.8% y/y). Electrical equipment inventories improved 0.3% (0.1% y/y) while computer & electronic product inventories gained 0.4% (0.3% y/y). Nondurable product inventories fell 3.2% (-5.3% y/y) as the value of petroleum refinery stockpiles dropped by roughly one-quarter (-29.8% y/y). Apparel inventories eased 0.2% (-4.6% y/y) and food product inventories fell slightly and were unchanged 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 Mar Feb Jan Mar Y/Y 2019 2018 2017
New Orders -10.3 -0.1 -0.5 -11.4 -0.5 7.3 5.7
Shipments -5.2 -0.3 -0.6 -6.5 0.7 6.9 5.0
Unfilled Orders -2.0 0.1 0.0 -3.8 -2.1 3.9 1.9
Inventories -0.8 -0.4 -0.3 0.3 3.1 3.5 4.5
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