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 5/2/08 For Mar 2008 | ||||||||||||
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Highlights
Factory orders showed less weakness than expected in March, a plus for the manufacturing sector and confirming indications in yesterday's ISM report that the sector is flat but steady. The headline reading jumped 1.4 percent in March but reflects an inflation-related 2.6 percent spike in the nondurable goods component which includes fuels. The durable goods component, first released in last week's durable goods report, rose 0.1 percent in the month and is upwardly revised from last week's 0.3 percent decline -- which really represents the best news in the report.
Among industries, orders remain strong for primary metals but here too inflation is at play as steel makers have been aggressively passing through fuel-related cost increases. More reliable signs of strength come from fabricated products and a bounce back in machinery which posted a severe decline in February. Electrical equipment was weak reflecting the trouble in the housing sector while new orders for transportation equipment were also weak. By market groups, capital goods orders were flat, dipping 0.1 percent in the month, while consumer goods, again reflecting fuel-related distortions, jumped 1.9 percent. Orders for consumer durable goods plunged 5.6 percent following a 3.4 percent plunge in February.
New orders offer a leading indicator for factory output and factory employment and today's news shows less weakness than expected -- but it also shows the distortions that are common during a time of inflation. The dollar rose as did Treasury yields immediately following the report, a report that usually doesn't get much market reaction at all.
Factory orders are showing a weak manufacturing sector, falling 1.3 percent in February. Part of the weakness was due to a temporary drop in energy costs as the nondurables component fell 1.5 percent. Durables fell 0.9 percent for the revised February number. More recently, in the advance report, durables slipped 0.3 percent with most of the weakness in defense capital goods and motor vehicles. Expect a bump up in energy prices to lead to a rebound in nondurables orders. Excluding transportation, the overall orders number should post a moderate gain.
Factory orders Consensus Forecast for March 08: +0.3 percent
Range: -0.6 to +1.5 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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