Factory orders decline once again, in line with the Bloomberg Consensus, but last month was also revised lower.
New orders for the export-hit factory sector fell 1.0 percent in September for the 11th decline in 14 months with August revised 4 tenths lower to minus 2.1 percent. September orders for durable goods, initially posted in last week’s advance report, are unrevised at minus 1.2 percent, held down in part by a downswing in civilian aircraft but nevertheless showing wide weakness. Orders for non-durable goods, pulled down by weakness for petroleum and coal products, fell 0.8 percent to extend a run of sizable declines going back to July. The factory sector has been struggling with weakness in the energy sector and especially weak foreign demand that for U.S. goods has been made weaker by the strength in the dollar.
Primary metals were down in the month as were both machinery and computers. Orders for core capital goods, despite the decline for machinery, were flat though shipments improved from an especially weak August. Industries showing gains for orders in the month include fabricated metals and electrical equipment, both getting a lift from what are strong gains in construction spending. Orders for vehicles were also up.
Outside of new orders, readings are negative with shipments down 0.4 percent for a third straight decline and with unfilled orders down 0.5 percent for a second straight decline. Declines in these readings, not to mention weakness in new orders, are not good for the sector’s employment outlook. Inventories also declined, down 0.4 percent for a third straight decline.
With the factory sector in downturn, unwanted inventories are a heightened risk and manufacturers are keeping them in check, a factor that sharply held down third-quarter GDP growth and, unless orders pick up, may also hold down fourth-quarter GDP as well. The factory sector is struggling and is chief on the list of 2015 disappointments.
Orders and Shipments
Mike “Mish” Shedlock