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Economy in Brief

U.S. Factory Orders and Shipments Rebounded in May
by Sandy Batten  July 2, 2020

• Factory orders rebounded in May, rising 8.0% m/m, after meaningful declines in both March and April.

• Strong gains in orders for both durable and nondurable goods in May.

• Shipments also rebounded in May, but more modestly.

U.S. factory orders and shipments rebounded in May, providing another indication that April will likely be the weakest month for the economy in the recession that began in March. Factory orders rose a larger-than-expected 8.0% m/m (-15.8% y/y) in May following a 13.5% m/m drop in April and an 11.0% m/m decline in March. For the three months ending in May, orders were down 16.8%. The Action Economics Forecast panel had looked for orders to rise 7.2% m/m in May. Orders for both durable and nondurable goods posted gains in May with durable goods orders up 15.7% m/m and nondurable goods orders up 2.0% m/m. Both subgroups had posted meaningful declines in March and April.

While durable goods orders rose in every major category in May, the rebound was led by transportation, which rose 82.0% m/m following declines of 48.9% m/m in April and 43.2% m/m in March. In the three months ending in May, transportation orders are still down 47.2% even after the May rebound, highlighting the base effect problems inherent in calculating monthly percent changes. Orders for nondurable goods, the new information in this report, rose 2.0% m/m in May after having declined in each of the previous four months over which they fell 14.4%.

Shipments rose a more modest 3.1% m/m (-17.0% y/y) in May following declines of 14.0% m/m and 5.5% m/m in April and March, respectively. Shipments of durable goods were up 4.4% m/m while shipments of nondurable goods rose 2.0% m/m. As was the case for orders, shipments of durable goods rose in each major category in May with a 12.4% m/m increase in transportation shipments providing most of the leadership. Shipments of nondurable goods rose in most major categories, led by a 12.1% m/m increase in petroleum shipments which accounted for more than 70% of the rise in shipments of nondurable goods.

Unfilled orders for manufactured products edged up 0.1% m/m (-4.1% y/y) in May after falling 1.6% m/m in April and 2.1% m/m in March. Factory sector inventories rose 0.2% m/m (-0.7% y/y) in May, the first monthly increase in five months. Inventories of durable goods rose 0.1% m/m while inventories of nondurable goods increased 0.3% m/m, their first monthly rise in five months.

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

Factory Sector (% chg) - NAICS Classification May Apr Mar May Y/Y 2019 2018 2017
New Orders 8.0 -13.5 -11.0 -15.8 -0.2 6.9 5.6
Shipments 3.1 -14.0 -5.5 -17.0 0.9 6.7 4.4
Unfilled Orders 0.1 -1.5 -2.1 -4.1 -1.9 3.8 2.7
Inventories 0.2 -0.5 -1.1 -0.7 2.8 3.7 4.3
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