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 6/3/08 For Apr 2008 | ||||||||||||
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Highlights
Boosted by a price-related 2.8 percent month-to-month jump for nondurable goods, factory orders rose 1.1 percent in April despite a 0.6 percent decline for durable goods. The Commerce Department said the gain in non-durables was tied to petroleum and coal products.
A look at separate durable components shows a 4.2 percent month-on-month decline for vehicles and a 25 percent decline for construction machinery, which is no surprise given the housing slump. Computers fell 23 percent, a group suffering constant price erosion. But there were nearly 50 percent gains for mining machinery, no surprise given the rise in commodity prices, and electrical equipment, a gain that hints at capacity expansion.
Unfilled orders slipped 0.9 percent but remain, thanks to Boeing and Airbus, unusually high. Inventories were unchanged and look to be lean, a big plus should recession take hold. And a big positive was shipments, up 2.2 percent in total and up 1.6 percent for durable goods. Shipments of nondefense capital goods, which give a look at business investment in the GDP report, rose 1.1 percent and make for a good start to the second quarter.
This report is more positive than yesterday's flat report from the ISM. Together they suggest that there's more room for optimism in manufacturing than pessimism. But apart from inflated gains for non-durable goods, the most important thing to watch will be the production of durable goods and whether it remains firm, especially given problems in the auto sector. Next data on the manufacturing sector will be in Friday's employment report.
Factory orders showed less weakness than expected in March, with the headline reading jumping 1.4 percent in March. However, much of the boost reflected an inflation-related 2.6 percent spike in the nondurable goods component which includes fuels. The durable goods component rose a modest 0.1 percent in the month in the latest full factory orders report. More recently, in the advance durables report for April, durable goods orders in April fell 0.5 percent but with most of the weakness in the volatile transportation component. April durables excluding transportation jumped 2.5 percent. Even though the consensus is calling for a small dip in orders, a rebound in energy prices may boost nondurables orders for April, likely resulting in an overall gain for the month.
Factory orders Consensus Forecast for April 08: -0.1 percent
Range: -0.6 to +0.4 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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