August 2014 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments decreased $5.0 billion or 1.0 percent to $503.1 billion in August. Shipments of durable goods decreased $4.0 billion or 1.6 percent to $245.9 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $1.0 billion or 0.4 percent to $257.2 billion, led by petroleum and coal products. Wood and Paper shipments rose by 1.0 and 0.2 percent, respectively. 

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Inventories increased $0.8 billion or 0.1 percent to $653.9 billion (the highest level since the series was first published on a NAICS basis). The inventories-to-shipments ratio was 1.30, up from 1.29 in July.

Inventories of durable goods increased $1.7 billion or 0.4 percent to $403.1 billion, led by transportation equipment. Nondurable goods inventories decreased $0.9 billion or 0.3 percent to $250.8 billion, led by petroleum and coal products. Inventories of Wood expanded by 0.1 percent, while Paper was unchanged. 

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New orders decreased $56.1 billion or 10.1 percent to $502.0 billion, more than reversing July’s biggest month-over-month rise on record. Excluding transportation, new orders decreased 0.1 percent -- the third drop in the last four months. Durable goods orders decreased $55.1 billion or 18.4 percent to $244.8 billion, led by transportation equipment. New orders for nondurable goods decreased $1.0 billion or 0.4 percent to $257.2 billion.

Prior to July, as can be seen in the graph above, real (inflation-adjusted) new orders had been essentially flat since early 2012, recouping roughly 75 percent of the losses incurred since the beginning of the Great Recession. With July’s transportation-led spike now in the rearview mirror, new orders have dropped back to around 73 percent or their December 2007 high. 

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Unfilled durable-goods orders increased $7.0 billion or 0.6 percent to $1,164.5 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.71, up from 6.62 in July. Real unfilled orders, a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders in June were back to just 79 percent of their December 2008 peak. Real unfilled orders jumped to 102 percent of the prior peak in July, thanks to the largest-ever batch of aircraft orders, and are likely to keep this metric elevated for several years.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.