Factory inventories inched up just 0.1% during December after a slowed 0.2% November gain. The 0.6% increase in factory inventories during 4Q06 was the slowest since 3Q05.

Primary metals inventories actually fell during the last two months (+17.9% y/y). Automobile inventories also plummeted 11.8% (+6.3% y/y) and inventories of furniture fell 1.5% (+4.3% y/y). These declines were offset by higher electrical equipment inventories (11.3% y/y), higher inventories of computers (+8.4% y/y) and higher machinery inventories (8.7% y/y).

Total factory orders rose a firm 2.4% following a downwardly revised 1.2% November increase. Durable goods orders surged 2.9% which was little revised from the advance report of a 3.1% pop. Factory orders less transportation surged 2.2% (2.4% y/y) though nondurable are even y/y reflecting lower oil prices but also a decline in textiles.

Factory shipments surged 1.4% reflecting a 1.0% jump in durables which was broad based. Factory shipments less transportation jumped 1.0% (1.0% y/y).

Unfilled orders surged 2.1% due to the another jump in civilian aircraft (39.5% y/y). Less the transportation sector altogether backlogs rose 1.3% (13.8% y/y).