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Monday, May 04, 2015 1:38 PM

Factory Orders Positive First Time in 8 Months, Remain Weak

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Last month I noted Factory Orders Unexpectedly Rise Snapping String of 6 Straight Declines. They didn't. Last month's orders were revised to the negative column in today's report.

Factory Orders Rise but Soft

Today, the Bloomberg Economic Consensus on factory orders was correct, but soft.

Boosted by aircraft and also by motor vehicles, factory orders rose an as-expected 2.1 percent in March. March's gain ends what were 7 straight declines as February, which was initially at plus 0.2 percent, is revised now to minus 0.1 percent. The 7 straight declines are the most striking evidence of how hard the manufacturing sector has been hit, by the strong dollar that weakens exports and also specific trouble in the energy sector due to the downturn in oil.

But in March, the sector got a big boost from civilian aircraft, an industry where big monthly swings are normal, but also from motor vehicle & parts where orders rose 6.0 percent in what is one of the very strongest gains of the recovery. Excluding transportation, however, orders were unchanged compared to only a 0.1 percent gain in February, with the latter revised down sharply from an initial reading of plus 0.8 percent.

Energy equipment rebounded 4.8 percent in the month but following a long streak of declines including an 18.5 percent drop in February. Industrial machinery was also down on the month. Other industries on the plus side include computers and defense capital goods.

Orders for capital goods in general were mixed, up only 0.1 percent on the core, which excludes aircraft, and extending their downward slope.

Other readings include a sizable 0.5 percent rise in shipments. Another plus is a small rise in unfilled orders which have been especially weak. Inventories held steady relative to sales, with the inventory-to-sales rate unchanged at 1.35.

The pop in March ends the first quarter on a positive note but the early indications on the second quarter, despite expectations of an outsized weather boost, have all been soft.
New Orders and Shipments Percent Change From Year Ago

Census Report

Diving into the Census Report, for March (seasonally adjusted) we find new orders look like this:

All Manufacturing: +2.1%
....Excluding Transportation: +0.0%
....Excluding Defense: +1.3%
....With unfilled orders +4.9%

Durable Goods +4.4%
....Transportation +13.5%
........Motor Vehicles, Bodies, Parts +3.4%
........Nondefense Aircraft +30.6%
........Defense Aircraft and Parts +103.0%

Nondurable Goods -0.3%

As noted before, aircraft orders have a long lead time and are more subject to cancellation than other orders. For the second month in a row, the string of declines finally ends. This time, I think the rise will stick. Hooray! Otherwise, this looks like another questionable month. Excluding transportation, there was no increase in factory orders.

Mike "Mish" Shedlock

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