February 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 February decreased $0.8 billion or 0.2% to $500.3 billion. Durable goods shipments increased $2.2 billion or 0.9% to $252.4 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $3.0 billion or 1.2% to $247.9 billion, led by petroleum and coal products. Shipments of wood products fell by 0.4%; paper +0.5%. 

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Inventories decreased $2.6 billion or 0.4% to $699.4 billion. The inventories-to-shipments ratio was 1.40, unchanged from January. Inventories of durable goods decreased $0.1 billion or virtually unchanged to $434.5 billion, led by computers and electronic products. Nondurable goods inventories decreased $2.5 billion or 0.9% to $264.9 billion, led by petroleum and coal products. Inventories of wood products expanded by 0.4%; paper: -0.6%. 

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New orders decreased $0.1 billion or virtually unchanged to $497.4 billion. Excluding transportation, new orders fell by 0.9% (+2.1% YoY). Durable goods orders increased $3.0 billion or 1.2% to $249.5 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- decreased by 0.9% (+1.5% YoY). New orders for nondurable goods decreased $3.0 billion or 1.2% to $247.9 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 50% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $1.4 billion or 0.1% to $1,158.6 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.61, down from 6.62 in January. 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.