July 2015 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 $0.8 billion or 0.2% to $483.6 billion in July. Shipments of durable goods increased $2.4 billion or 1.0% to $243.3 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $3.1 billion or 1.3% to $240.3 billion, led by petroleum and coal products. Shipments of both Wood and Paper rose, respectively, 2.0% and 0.9%. 

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Inventories decreased $0.6 billion or 0.1% to $651.2 billion. The inventories-to-shipments ratio was 1.35, unchanged from June. Inventories of durable goods decreased $0.3 billion or 0.1% to $401.8 billion, led by primary metals. Nondurable goods inventories decreased $0.3 billion or 0.1% to $249.4 billion, led by petroleum and coal products. Inventories of Wood and Paper both expanded by 0.1%. 

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New orders increased $2.0 billion or 0.4% to $482.0 billion (+0.9% expected). Excluding transportation, new orders decreased 0.6% (-6.9% YoY -- the ninth consecutive month of year-over-year contraction). Durable goods orders increased $5.1 billion or 2.2% to $241.7 billion, led by transportation equipment. New orders for nondurable goods decreased $3.1 billion or 1.3% to $240.3 billion. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- rose by 2.1% in July, but was 3.7% below its year-earlier level.

Prior to July 2014, as can be seen in the graph above, real (inflation-adjusted) new orders had been essentially flat since early 2012, recouping roughly 78% of the losses incurred since the beginning of the Great Recession. With July 2014’s transportation-led spike gradually receding in the rearview mirror, new orders are back to nearly 63% of their December 2007 high. 

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Unfilled durable-goods orders increased $2.8 billion or 0.2% to $1,198.0 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.89, down from 6.92 in June. Real unfilled orders, which had been a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders in June 2014 were back to 97% of their December 2008 peak. Real unfilled orders jumped to 122% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders, hence, this metric is likely to remain 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.