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Factory Orders: Solid Gains

October 5, 2017
Bottom Line: Factory orders rose slightly more than expected in August. Amid volatility related mostly to aircraft orders, factory orders have grown at a 4% annual pace over the last 3 months, faster than the pace of the last 6 months but slower than that of the last 12 months. While we'd expect some volatility in the coming months due to the hurricanes, the trend is improving moderately. The Inventory to shipments ratio has been declining moderately, suggesting strength in the medium-term. Finally, the July/August average is moderately above its Q2 level, suggesting a boost to the equipment spending component of the business fixed investment category of Q3 GDP.

Factory Orders ROSE by 1.2% in August, compared with market expectations for an increase of 1.0%.

Durable goods orders climbed by 2.0%, as previously reported, while nondurable goods orders jumped by 0.4%. Excluding orders for defense goods, civilian aircraft and petroleum products, (so called) core factory orders were nearly unchanged.

Factory orders are now 5.7% ABOVE their year ago level but the year-over-year growth rate has risen moderately over the past year (from -2.2% a year ago to the current 5.7%).

The July/August average is moderately above its Q2 level, suggesting a slight increase in equipment spending in Q3.