April 2016 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

Click image for larger view 

Click image for larger view

According to the U.S. Census Bureau, the value of manufactured-goods shipments increased $2.2 billion or 0.5% to $456.8 billion in April. Shipments of durable goods increased $1.3 billion or 0.5% to $232.5 billion, led by transportation equipment. Meanwhile, nondurable goods shipments increased $1.0 billion or 0.4% to $224.3 billion, led by petroleum and coal products. Shipments of both Wood (-2.7%) and Paper (-0.2%) fell. Incidentally, the Census Bureau revised most of these data series back through 2001, and -- at least in the case of Wood during June 2015 -- seems to have introduced errors into the data. 

Click image for larger view

Inventories decreased $0.5 billion or 0.1% to $620.8 billion. The inventories-to-shipments ratio was 1.36, down from 1.37 in March. Inventories of durable goods decreased $0.6 billion or 0.1% to $384.5 billion, led by machinery. Nondurable goods inventories increased less than $0.1 billion or virtually unchanged to $236.3 billion, led by petroleum and coal products. Inventories of both Wood (+0.4%) and Paper (+0.1%) rose. 

Click image for larger view

New orders increased $8.7 billion or 1.9% to $460.5 billion. Excluding transportation, new orders increased 0.8% (but -1.2% YoY -- the 18^th consecutive month of year-over-year contractions). Durable goods orders increased $7.7 billion or 3.4% to $236.2 billion, led by transportation equipment. New orders for nondurable goods increased $1.0 billion or 0.4% to $224.3 billion. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- dropped by 0.6% (-6.0% YoY). After the revisions mentioned above, business investment spending contracted on a YoY basis during 11 months of 2015, and three of the four months in 2016.

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 51% of the ground given up in the Great Recession. 

Click image for larger view

Unfilled durable-goods orders increased $6.6 billion or 0.6% to $1,137.3 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.94, up from 6.93 in March. 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 penetrating further 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.