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Economy in Brief

U.S. Factory Orders Unexpectedly Fall in July for the First Time Since September
by Winnie Tapasanun  September 2, 2022

• New orders -1.0% in July following nine straight m/m rises; June revised down to +1.8%.

• Shipments decline 0.9%, led by a 1.9% drop in nondurable goods.

• Unfilled orders rise 0.7%, easing from June's 0.8%, while inventories increase a marginal 0.1%.

Total factory orders fell 1.0% m/m (+12.5% y/y) in July after rises of 1.8% in June (originally +2.0%) and 1.8% in May, according to the U.S. Census Bureau. The July m/m fall was the first since September's -0.3%. A 0.2% m/m increase for July had been expected in the Action Economics Forecast Survey. Factory orders excluding the transportation sector slid 1.1% (+11.3% y/y), the first m/m slide since April 2020, reversing June's 1.0% gain.

Durable goods orders slipped 0.14% (+10.7% y/y) in July, the first m/m decline since February, after a 2.3% gain in June (-0.02% in the advance report for July). The July easing reflected m/m orders declines of 1.7% (+4.6% y/y) in primary metals, 1.2% (+8.5% y/y) in electrical equipment, appliances & components, and 0.7% (+18.8% y/y) in transportation equipment. To the upside, orders for furniture & related products (1.7%; 3.9% y/y), fabricated metal products (1.2%; 9.3% y/y), computers & electronic products (0.8%; 7.4% y/y), and machinery (0.3%; 7.0% y/y) posted their m/m gains in July.

Total shipments fell 0.9% (+11.8% y/y) in July, the first m/m fall since February 2021, after a 0.8% gain in June. Excluding transportation, shipments decreased 1.2% (+11.9% y/y), also down for the first time since February 2021, after a 0.9% June increase. Shipments of durable goods industries rose 0.2% (9.4% y/y), the 11th straight m/m rise, on top of a 0.3% June increase. Shipments grew in some key industry groups, notably by gains of 1.1% (11.0% y/y) in transportation equipment and 0.7% (9.3% y/y) in nonmetallic mineral products. Shipments for primary metals, however, fell 2.8% (+7.5% y/y) and miscellaneous durable goods shipments fell 0.4% (+5.6% y/y); both decreased for the second straight month. Shipments for electrical equipment, appliances & components declined 2.0% (+7.4% y/y) in July following two successive m/m rises. Shipments for wood products slid 0.5% (+3.0% y/y), the fourth consecutive m/m slide.

Nondurable goods orders, which equal nondurable goods shipments, fell 1.9% (+14.3% y/y) in July, the first m/m fall since February 2021 and the deepest since April 2020, after a 1.4% gain in June. The July fall reflected monthly drops of 6.7% (+50.6% y/y) in petroleum & coal products, 1.0% (+2.1% y/y) in paper products, 0.9% (+17.0% y/y) in beverage & tobacco products, 0.7% (+2.3% y/y) in apparel, 0.7% (+5.6% y/y) in basic chemicals, and 0.2% (+8.5% y/y) in leather & allied products. In contrast, nondurable goods shipments for the following items posted m/m increases in July: printing (0.8%; 13.3% y/y), textile mills (0.6%; 0.3% y/y), plastics & rubber products (0.2%; 8.0% y/y), food products (0.1%; 4.8% y/y), and textile products (0.1%; 4.0% y/y).

Unfilled orders grew 0.7% (7.4% y/y) in July, the 19th straight m/m gain, after a 0.8% rise in June. Excluding transportation, unfilled orders rose 0.3% (6.0% y/y) after increases of 0.1% in both June and May. The July gain in unfilled orders was led by 1.1% (12.8% y/y) in electrical equipment, appliances & components, 1.0% (8.3% y/y) in transportation equipment, and 0.7% (1.8% y/y) in furniture & related products but partly offset by a 0.3% decline (-0.6% y/y) in primary metals.

Inventories ticked up 0.1% (9.9% y/y) in July after a 0.4% rise in June, continuing their string of increases since October 2020. Excluding transportation, inventories edged up 0.1% (11.5% y/y) after a 0.5% June gain. Inventories of durable goods rose 0.3% (8.8% y/y), continuing their rises since February 2021, while inventories of nondurable goods fell 0.2% (+11.6% y/y), the first m/m easing since September 2020's -0.4%.

The factory sector data are available in Haver's USECON database. The Action Economics Forecast Survey is in the AS1REPNA database.

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