US: Factory Orders


Thu May 04 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Factory Orders - M/M change 0.4% -0.3% to 0.4% 0.2% 1.0% 1.2%

Highlights
Factory orders, like much of the economy, fizzled in March, up only 0.2 percent and skewed higher for a third month in a row by aircraft. The split between the report's two main components shows a 0.5 percent dip for nondurable goods -- the new data in today's report where weakness is tied to petroleum and coal -- and a 0.9 percent rise for durable orders which is 2 tenths higher than last week's advance report for this component.

The gain for durables looks impressive but when excluding transportation equipment (which is where aircraft is tracked) orders fell 0.3 percent. But core capital goods orders are a plus in the report, rising 0.5 percent (nondefense ex-aircraft) though the gain follows marginal increases of 0.1 and 0.2 percent in the prior two months.

Unfilled factory orders, which had been in long contraction, are a clear plus, up 0.3 percent following February's 0.1 percent gain for the best back-to-back showing in 2-1/2 years. A negative however is a 0.1 percent decline in total shipments that came despite a constructive 0.5 percent rise in shipments of core capital goods. Inventories were unchanged in the month though the dip in shipments drove the inventory-to-shipments ratio 1 tenth higher to a less lean 1.32.

Aircraft had a weak year last year and have been making up lost ground so far this year. But how long Boeing can give total orders a lift is uncertain, and the performance of the wider factory sector, despite sky high strength in many anecdotal reports, has been no better than mixed.

Market Consensus Before Announcement
Factory orders are on the rise and are expected to gain 0.4 percent at the headline level in February. Orders for civilian aircraft, as indicated in the advance durable goods report, have been improving and are expected to boost March's totals as they did in both February and January. But capital goods orders in this report have been weak.

Definition
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.



Description
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.