U.S. Factory Activity Sector Activity Weakens Substantially

• 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.

• Crude oil prices collapsed last week but have rebounded recently.

• Gasoline prices fall as drivers shelter at home.

• Natural gas prices have been volatile.

The spot price of West Texas Intermediate crude oil collapsed to $3.83 (-94.1% y/y) per barrel in the week ended April 24 from an average of $20.11 in the previous week. This was the lowest weekly average price in the history of the series which dates back to 1984. The weekly average was distorted by the daily price falling into negative territory (-$36.98 per barrel on April 20) as inadequate storage led to a selling frenzy on the last day of the current futures contract. The price has since rebounded into positive territory ($12.78 per barrel at yesterday's close). The price of Brent crude oil also declined sharply during the most recent week but did not face the April 20 sell-off that WTI experienced. The Brent price fell sharply to $21.75 per barrel, the lowest since March 2002, in the week ended April 24 from $29.18 the previous week. And it fell further to $19.98 yesterday.

Reflecting the fall in crude prices and the general lack of demand from sheltering at home, retail gasoline prices declined to $1.77 per gallon (-38.6% y/y) in the week ended April 27 from $1.81 per gallon the previous week. The most recent price is the lowest since the week ended February 15, 2016. Haver Analytics adjusts the gasoline price series for regular seasonal variation. The seasonally adjusted price fell to $1.67 per gallon, the lowest since January 2004, from $1.73.

The average price of natural gas jumped up to $1.85/mmbtu (-27.7% y/y) in the week ended April 24 from $1.72/mmbtu the previous week. This was the second increase in the past three weeks. However, natural gas prices have been extremely volatile recently. Yesterday, the price slid to $1.68/mmbtu.

Reduced oil and product prices reflect a collapse in demand and a rise in supply. In the four weeks ending April 17, gasoline demand plummeted 41.4% y/y, while total petroleum product demand fell 25.4% y/y. Crude oil input to refineries declined 17.0% y/y in the past four weeks. At the same time, gasoline inventories rose 16.6% y/y and inventories of all petroleum products increased 6.1% y/y.

These data are reported by the U.S. Department of Energy. The price data can be found in Haver's WEEKLY and DAILY databases. Greater detail on prices, as well as the demand, production and inventory data, along with regional breakdowns, are in OILWKLY.