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 10/2/08 For Aug 2008 | ||||||||||||
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Highlights
The factory sector contracted severely in August and, based on ISM's report yesterday, also contracted in September. Today's report winds up the data on August when factory orders plunged 4.0 percent reflecting a 4.8 percent contraction for durable goods and a 3.3 percent contraction on the nondurables side that reflects lower prices for energy. Monthly contraction was severe for primary metals, machinery, electrical equipment, and especially transportation. Most of these industries contain components for capital goods categories which showed a 7.9 plunge for nondefense capital goods in a reading that points to declines in business investment, yet another negative for the outlook on GDP. Orders for consumer goods also contracted, down 4.7 percent. Factory orders for July, in yet more bad news, were revised down to a gain of 0.7 percent from 1.3 percent.
Other data in the report include a 3.5 decline in shipments with shipments of nondefense capital goods down 3.2 percent, a reading that specifically will weigh on third-quarter GDP. But unfilled orders remain a very big positive, up 0.4 percent. Enormous backlogs, centered in aerospace, point to long term resiliency for the factory sector, unless of course economic weakness triggers a run of cancellations. Inventories rose 0.6 percent but yesterday's related reading from the ISM points to drawdown for September. The ISM data also points, unfortunately, to yet another steep decline in factory payrolls, data to be included in tomorrow's employment report. The manufacturing sector, which had been holding its own, is now struggling with the Boeing strike, which is guaranteed to cut into September aircraft production, a new negative.
Factory orders rose 1.3 percent in July, following a 2.1 percent jump in June. New orders for durable goods were up 1.3 percent while new orders for nondurable goods rose 1.2 percent. More recently, in the advance report for durables in August, new durables orders dropped a sharp 4.5 percent, largely on declining aircraft orders. Lower oil prices likely will weaken the nondurables component for August.
Factory orders Consensus Forecast for August 08: -2.5 percent
Range: -6.0 to +0.5 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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