Factory Orders up 2.4% for July 2011

The Manufacturers’ Shipments, Inventories and Orders for July 2011 was released today. New orders overall increased 2.4%. Removing transportation (which includes aircraft) from the numbers, new orders increased 0.9%, so things aren't as good as they seem. Air-o-plane new orders, not defense, shot up 43.4%. This report is commonly referred to as Factory Orders in the press and refers to domestic manufactured goods, both durable and non-durable. Below is the monthly percent change, overall for durable goods new orders, which increased 4.1%. This graph includes nondefense aircraft new orders.


Durable Goods


While computers crashed and burned, new orders down -7.4%, motor vehicles new orders increased by 11.6%.

Core capital goods new orders decreased -0.9% and is considered a future activity indicator.


Core Capital Goods


Here is the U.S. Department of Commerce's definition of capital goods:

The Capital Goods Industries include Nondefense : small arms and ordnance; farm machinery and equipment; construction machinery; mining, oil, and gas field machinery; industrial machinery; vending, laundry, and other machinery; photographic equipment; metalworking machinery; turbines and generators; other power transmission equipment; pumps and compressors; material handling equipment; all other machinery; electronic computers; computer storage devices; other computer peripheral equipment; communications equipment; search and navigation equipment; electromedical, measuring, and control instruments; electrical equipment; other electrical equipment, appliances, and components; heavy duty trucks; aircraft; railroad rolling stock; ships and boats; office and institutional furniture; and medical equipment and supplies.

What the press calls core capital goods is actually capital goods minus aircraft and defense. Capital goods are durable goods as well. Capital goods are also called the means of production and this is the stuff used to make stuff, so having a decline like this is not good news.

Inventories are at record highs....again. From the press release:

Inventories, up twenty one of the last twenty two months, increased $2.9 billion or 0.5 percent to $598.0 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent June increase. The inventories-to-shipments ratio was 1.32, down from 1.33 in June.

Shipments, inventories will affect GDP, but July is the 1st month in the 3rd quarter. Shipments were up 2.4% overall with transportation equipment up 8%. But shipments in core capital goods decreased -0.2% from June.

For more details here is the website for manufacturing data. This report covers manufacturing with shipments of $500 million or more and is the 2nd of two monthly reports.

Here is last month's overview with some details on shipments are used an an approximation for investment GDP numbers.

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