September 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 in September increased $4.6 billion or 0.9% to $509.8 billion. Durable goods shipments increased $3.0 billion or 1.2% to $256.5 billion led by transportation equipment. Meanwhile, nondurable goods shipments increased $1.6 billion or 0.6% to $253.3 billion, led by petroleum and coal products. Shipments of wood products slid by 0.3%; paper: -0.1%. 

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Inventories increased $3.7 billion or 0.5% to $680.4 billion. The inventories-to-shipments ratio was 1.33, down from 1.34 in August. Inventories of durable goods increased $3.0 billion or 0.7% to $410.9 billion, led by transportation equipment. Nondurable goods inventories increased $0.7 billion or 0.2% to $269.5 billion, led by petroleum and coal products. Inventories of wood products expanded by 0.5%; paper: 0.0%. 

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New orders increased $3.4 billion or 0.7% to $515.3 billion. Excluding transportation, new orders rose by 0.4% (+5.9% YoY). Durable goods orders increased $1.8 billion or 0.7% to $262.0 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- ticked down by -0.1% (+1.1% YoY). New orders for nondurable goods increased $1.6 billion or 0.6% to $253.3 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 66% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $9.7 billion or 0.8% to $1,186.5 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.64, down from 6.67 in August. 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. Thereafter, however, real unfilled orders gradually declined and have turned higher only since 2018 began.

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.