April 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 $0.1 billion or virtually unchanged to $492.8 billion in April. Durable goods shipments decreased less than $0.1 billion or virtually unchanged to $247.0 billion led by transportation equipment. Meanwhile, nondurable goods shipments increased $0.1 billion or 0.1 percent to $245.8 billion, led by food products. Shipments of wood products fell by 0.4%; paper: -0.3%. 

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Inventories increased $2.2 billion or 0.3 percent to $666.9 billion. The inventories-to-shipments ratio was 1.35, unchanged from March. Inventories of durable goods increased $1.3 billion or 0.3 percent to $401.9 billion, led by fabricated metal products. Nondurable goods inventories increased $0.8 billion or 0.3 percent to $265.0 billion, led by chemical products. Inventories of wood products rose by 0.3%; paper: -0.1%. 

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New orders decreased $4.0 billion or 0.8 percent to $494.4 billion. Excluding transportation, new orders rose (+0.4% MoM; +8.7% YoY). Durable goods orders decreased $4.1 billion or 1.6 percent to $248.6 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- jumped (+1.0% MoM; +7.4% YoY). New orders for nondurable goods increased $0.1 billion or 0.1 percent to $245.8 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 less than 70% of the losses incurred since the beginning of the Great Recession. The recovery in real new orders is back to just 57% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $5.4 billion or 0.5 percent to $1,153.1 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.73, up from 6.66 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 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.