Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month. Why Investors Care
| Released on 10/4/07 For Aug 2007 | ||||||||||||
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Highlights
Factory orders fell back 3.3 percent in August, a bit worse than expectations for a 2.8 percent dip. Orders for non-durable goods, the new piece in today's data, fell 1.6 percent in the month on declines in petroleum and coal products, categories likely affected by a combination of both price changes and lower demand. Orders for durable goods were unrevised at a decline of 4.9 percent, a steep fall reflecting a month-to-month downswing in the always volatile transportation component which for August included heavy declines in both vehicle and aircraft orders. The decline in vehicle orders, at 8.5 percent, was in fact the largest in nearly five years. Improving vehicle sales in August and September, however, along with the quick end to the GM strike may point to a bounce back for the category.
Factory orders are volatile as a rule with August's decline reversing a 3.4 percent rise in July (revised down 3 tenths). But the drop in August is nevertheless important given the month's trouble in the credit market and concern that it will hurt the wider the economy. A no more than moderate ISM report on Monday offers an early indication of what to expect for September. But inventories in the factory sector are lean which should limit negative effects on employment, and backlogs are also extremely strong, at a record and up 1.2 percent in the month. Friday's jobs report will offer important information on the factory sector including payroll changes and hours worked.
Factory orders surged in July, jumping 3.7 percent and led by an 11.0 percent spike in transportation orders, including both strong aircraft orders and motor vehicle orders. But there was plenty of strength outside of aircraft and vehicles, with orders excluding transportation up 2.4 percent. But more recently, new factory orders for durables - the largest component in factory orders - fell a sharp 4.9 percent in August, following a 6.1 percent surge in July. Usually the factory orders report does not get much attention because most of the data are already known from the durables report. But with the August durables number largely offsetting the July boost, the markets may actually be paying attention to whether the durables component is revised up or down in the overall report.
Factory orders Consensus Forecast for August 07: -2.8 percent
Range: -3.6 to -2.0 percent
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Even though monthly shipment data fluctuate less than new orders, both series show underlying trends more clearly by looking at year-over-year changes. In 2005, new orders rose more rapidly than shipments due to large gains in aircraft orders. Aircraft orders have a long lead to shipment. |
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