US: Factory Orders

Thu Nov 03 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Factory Orders - M/M change 0.2% 0.0% to 0.5% 0.3% 0.2% 0.4%

Good news is hard to find in the September factory orders report which is best described as flat. New orders did rise, up a moderate 0.3 percent in the month, and the prior month's gain is revised 2 tenths higher to 0.4 percent, but core capital goods orders (nondefense ex-aircraft) are down a sharp 1.3 percent and total unfilled orders keep contracting, down 0.4 percent for a fourth straight decline. Maybe the best news is that manufacturers are keeping their inventories down, unchanged in the month and down relative to shipments, to 1.34 from 1.35. Monday's advance indications on October from the ISM don't point to much change for a factory sector that continues to be held down by generally weak global demand and by weak investment in new equipment.

Market Consensus Before Announcement
Factory orders are expected to edge 0.2 percent higher in September in line with the 0.2 percent gain in advance data on durable goods orders. The durables report showed visible weakness in core capital goods orders though related shipments did rise.

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.