There's a recovery underway in the factory sector, but it's losing steam. Shipments of manufactured goods rose 0.8% in November (5.9% y/y) after a 0.4% October increase, but the magnitude of that recovery is misleading. Higher oil prices account for much of the recent gain. Less petroleum factory shipments rose just 0.3% (5.2% y/y) during November after a 0.7% October decline. For durable goods alone, shipments slipped 0.1% (+4.6% y/y), down for the third month in the last four. Orders for durable goods slipped 0.3% which was an upward revision from the advance report of a 1.3% decline. However, the 10.5% y/y increase is half that earlier in the year.

Factory inventories are growing. During November the 0.8% increase followed a 1.1% gain and the increase brought the inventory level to its highest since February 2009. The inventory/shipments ratio held steady in November at 1.28 but that was up from the January low of 1.24. Inventories at all three stages of fabrication are rising; the increases in materials & supplies, 5.4% y/y, and work-in-process, 8.2% y/y, suggest that factory managers may believe their demand is moving ahead, so they should rebuild stocks. Finished goods inventories rose 6.4% y/y.

The Manufacturers' Shipments, Inventories and Orders (MSIO) data are available in Haver's USECON database.