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Factory Orders: New Orders Decline Modestly

July 5, 2016
Bottom Line: Factory orders decreased modestly in May, slightly more than expectations (largely due to a decline in aircraft orders within durable goods orders, as previously reported). The growth rate has been declining over the past 17 months and is now -1.2% year-over-year.

Factory Orders FELL by 1.0% in May, compared with market expectations for a decline of 0.8%. The prior month's gain was revised lower from 1.9% to 1.8%. Durable goods orders declined by 2.3%, as previously reported, while nondurable goods orders rose by 0.3%. Excluding orders for defense goods, civilian aircraft and petroleum products, (so called) core factory orders FELL by 0.5%. Factory orders are now 1.2% BELOW their year ago level and the year-over-year growth rate has declined modestly over the past year (from -6.3% a year ago to the current -1.2%).

Nondefense Capital Goods Shipments and Nondefense Capital Goods Shipments excluding aircraft, proxies for capital spending were MIXED, ROSE by 1.1% and FELL by 0.5%, respectively. The April/May average is modestly above its Q1 level, will likely cause a modest gain in, capital spending, in Q2.

Factory Inventories FELL by 0.1% and the Inventory-to-Shipment Ratio STAYED at 1.36, sharply above its post-recession cyclical nadir of 1.26 reached in July 2011.
Article by contingentmacro