February 2016 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 $3.4 billion or 0.7% to $462.8 billion in February. Shipments of durable goods decreased $2.4 billion or 1.0% to $238.0 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $1.0 billion or 0.4% to $224.8 billion, led by petroleum and coal products. Shipments of Wood rose by 1.6% while Paper declined 0.6%. 

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Inventories decreased $2.6 billion or 0.4% to $634.3 billion. The inventories-to-shipments ratio was 1.37, unchanged from January. Inventories of durable goods decreased $1.3 billion or 0.3% to $394.1 billion, led by primary metals. Nondurable goods inventories decreased $1.3 billion or 0.5% to $240.2 billion, led by petroleum and coal products. Inventories of both Wood (-0.8%) and Paper (-0.2%) declined. 

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New orders decreased $8.0 billion or 1.7% to $454.0 billion. Excluding transportation, new orders decreased 0.8% (and -1.4% YoY -- the 16^th consecutive month of year-over-year contractions). Durable goods orders decreased $7.0 billion or 3.0% to $229.1 billion, led by transportation equipment. New orders for nondurable goods decreased $1.0 billion or 0.4% to $224.8 billion. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- fell by 2.5% (but +2.2% YoY). Business investment spending contracted on a YoY basis during every month of 2015, and revisions for January 2016 turned an uptick into a contraction.

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 on average 70% of the losses incurred since the beginning of the Great Recession. With July 2014’s transportation-led spike gradually receding in the rearview mirror, the recovery in new orders is back to just 48% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders decreased $4.1 billion or 0.3% to $1,184.0 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 7.02, up from 6.96 in January. 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. Since then, however, real unfilled orders have moved mostly sideways and are now below the January 2010-to-June 2014 trend line.

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.