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 4/2/08 For Feb 2008 | ||||||||||||
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Highlights
Factory orders fell 1.3 percent in February, worse than the -0.6 percent estimate and showing a back-to-back decline with January which, together with yesterday's fourth straight sub-50 reading for new orders in the ISM report, point to no more than flat conditions at the very best for the manufacturing sector, and not only for the first quarter but the second quarter as well.
Orders for nondurable goods, reflecting price changes for energy, fell 1.5 percent compared with January. Orders for capital goods also fell for a second month and, though year-on-year rates are solid in the mid single digits, point to a quarter-to-quarter decline for business investment.
Total shipments fell 2.1 percent while total inventories rose 0.5 percent, driving the inventory-to-shipments ratio up 3 tenths to 1.27. Inventory data in the ISM report were mixed and together with the gain in this report suggest a modest risk that inventory levels may swell as growth slows. Unfilled orders, largely reflecting aircraft backlog, are still a positive for the sector, up 0.9 percent in the month but up only a modest 2.5 percent on the year.
Factory orders fell 2.5 percent in January, led by a 5.1 percent drop in durables at the time of this report. The nondurable goods side posted a 0.3 percent rise reflecting a gain in food products, prices for which have been on the rise. More recently, durables orders declined 1.7 percent in February, suggesting a drop in overall orders for the month. Upward price pressure on commodities, however, could keep the nondurables component strong.
Factory orders Consensus Forecast for February 08: -0.6 percent
Range: -2.5 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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