US: Factory Orders

Thu Mar 05 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Factory Orders - M/M change 0.2% -2.5% to 3.0% -0.2% -3.4% -3.5%

Down 0.2 percent, factory orders fell for a 6th straight month in January. The decline is centered in non-durables which, in price effects tied to energy, fell 3.1 percent in the month, offsetting an unrevised 2.8 percent gain for durables (initial durables data released last week).

The rise in durables reflects a swing higher in the always volatile transportation component which, reflecting a big gain for commercial aircraft, jumped 9.7 percent.

Other details include a 2.0 percent decline for shipments, a decline that gets production off to a slow start for the first quarter. Inventories fell 0.4 percent in the month with unfilled orders down 0.2 percent.

The factory sector has not been contributing to economic growth, the result of weakness in the oil patch and weakness in foreign demand.

Market Consensus Before Announcement
Factory orders fell a very steep 3.4 percent in December for a 5th straight decline. This is the longest losing streak since the collapse of late 2008 and early 2009. Not helping was a full percentage point downward revision to November to minus 1.7 percent.

Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.

Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth which is less likely to cause inflationary pressures. By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.