February 2018 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 $1.0 billion or 0.2% to $500.5 billion in February. Durable goods shipments increased $2.2 billion or 0.9% to $249.8 billion led by machinery. Meanwhile, nondurable goods shipments decreased $1.2 billion or 0.5% to $250.7 billion, led by petroleum and coal products. Shipments of wood products edged up by 0.1%; paper: +0.2%. 

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Inventories increased $2.3 billion or 0.3% to $675.2 billion. The inventories-to-shipments ratio was 1.35, unchanged from January. Inventories of durable goods increased $1.8 billion or 0.4% to $410.8 billion, led by transportation equipment. Nondurable goods inventories increased $0.4 billion or 0.2% to $264.4 billion, led by petroleum and coal products. Inventories of wood products rose by 0.5%; paper: -0.3%. 

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New orders increased $6.0 billion or 1.2% to $498.0 billion. Excluding transportation, new orders nudged higher (+0.1% MoM; +6.5% YoY). Durable goods orders increased $7.2 billion or 3.0% to $247.3 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- jumped (+1.4% MoM; +6.8% YoY). New orders for nondurable goods decreased $1.2 billion or 0.5% to $250.7 billion.

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. Even with June 2017’s transportation-led jump, the recovery in real new orders is back to just 60% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $1.9 billion or 0.2% to $1,142.8 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.49, down from 6.52 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 then jumped to 102% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders. Since then, however, real unfilled orders have gradually declined; not only are they back below the December 2008 peak, but they are also generally diverging from 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.