January 2020 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 January decreased $2.3 billion or 0.5% to $501.8 billion. Durable goods shipments decreased $0.4 billion or 0.2% to $249.9 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $1.9 billion or 0.8% to $251.9 billion, led by petroleum and coal products. Shipments of wood products rose by 0.9%; paper +0.2%. 

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Inventories decreased $0.5 billion or 0.1% to $703.4 billion. The inventories-to-shipments ratio was 1.40, unchanged from December. Inventories of durable goods decreased less than $0.1 billion or virtually unchanged to $435.3 billion, led by machinery. Nondurable goods inventories decreased $0.5 billion or 0.2% to $268.1 billion, led by chemical products. Inventories of wood products shrank by 0.9%; paper: -0.2%. 

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New orders decreased $2.3 billion or 0.5% to $497.9 billion. Excluding transportation, new orders slipped by 0.1% (+1.4% YoY). Durable goods orders decreased $0.4 billion or 0.2% to $246.0 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- rose by 1.1% (+1.3% YoY). New orders for nondurable goods decreased $1.9 billion or 0.8% to $251.9 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 49% 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 $1,157.0 billion, led by fabricated metal products. The unfilled orders-to-shipments ratio was 6.63, down from 6.65 in December. Real unfilled orders, which had been a good litmus test for sector growth, show a less positive 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 been trending sideways-to-down.

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.