February 2017 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments increased $1.4 billion or 0.3% to $480.0 billion in February. Shipments of durable goods increased $0.8 billion or 0.3% to $239.4 billion, led by machinery. Meanwhile, nondurable goods shipments increased $0.6 billion or 0.2% to $240.5 billion, led by chemical products. Shipments of Wood and Paper rose by, respectively, 1.8 and 0.3%. 

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Inventories increased $1.2 billion or 0.2% to $630.0 billion. The inventories-to-shipments ratio was 1.31, unchanged from January. Inventories of durable goods increased $0.8 billion or 0.2% to $385.2 billion, led by primary metals. Nondurable goods inventories increased $0.3 billion or 0.1% to $244.8 billion, led by petroleum and coal products. Inventories of Wood and Paper shrank by, respectively, 0.8 and 0.5%. 

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New orders increased $4.8 billion or 1.0% to $476.5 billion. Excluding transportation, new orders rose by 0.4% (and +3.7% YoY -- the fifth month of year-over-year increases out of the past 24). Durable goods orders increased $4.2 billion or 1.8% to $236.0 billion, led by transportation equipment. New orders for nondurable goods increased $0.6 billion or 0.2% to $240.5 billion. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- edged down by 0.1% (and just +0.3% YoY). Business investment spending contracted on a YoY basis during all but five months since January 2015 (inclusive).

As can be seen in the graph above, real (inflation-adjusted) new orders were essentially flat between early 2012 and mid-2014, recouping on average 70% of the losses incurred since the beginning of the Great Recession. With July 2014’s transportation-led spike an increasingly distant memory, the recovery in new orders is back to just 55% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $0.1 billion or virtually unchanged to $1,115.3 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.53, down from 6.57 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; not only are they back below the December 2008 peak, but they are also diverging further below the January 2010-to-June 2014 trend-growth 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.