May Factory Orders

Updated 02-Jul-09 10:28 ET

About this release

Highlights

Total factory orders for May were up 1.2%, a bit more than an expected 0.9% gain.
Durables orders, which comprise about half the total, were unrevised from the previously reported 1.8% gain.
Nondurable orders were up 0.7%. A near flat number had been expected. This accounted for the larger than expected overall gain.

Key Factors

Orders were up 0.5% in April after declining 1.9% in March. Orders had plunged in December and January, but have now stabilized over the past four months.
This is a good sign that suggests industrial production may stabilize, but orders still remain below about 20% the levels of last year. Whether stabilization is good news in this context is a matter of the cup being half full or half empty.

Big Picture

Factory orders were very weak in the fourth quarter of 2008 and early 2009. This was due to severe weakness in durable orders and a downtrend in nondurable orders in late 2008. The outlook for orders is poor, as businesses are in full-scale retrenchment mode until signs of an upturn in the economy appear. The rate of decline is likely to ease, and there could be individual months of an uptick, but a steady uptrend in orders is a ways off.

Category	MAY	APR	MAR	FEB	JAN
Factory Orders	1.2%	0.5%	-1.9%	0.7%	-3.5%
Less Defense	1.0%	-0.1%	-2.0%	-0.1%	-1.9%
Durable Goods	1.8%	1.4%	-2.2%	1.6%	-7.8%
Nondurable Goods	0.7%	-0.2%	-1.6%	-0.2%	0.5%
Unfilled Factory Orders	-0.2%	-1.1%	-1.7%	-1.7%	-2.0%
Factory Shipments	-0.9%	-0.5%	-1.8%	-0.5%	-2.6%
Factory Inventories	-0.6%	-1.2%	-1.2%	-1.3%	-1.1%
Inventory/Shipment Ratio	1.45	1.45	1.46	1.45	1.46

Release Details

Factory Orders

Importance (A-F): This release merits a D+.
Source: The Census Bureau of the Department of Commerce.
Release Time: 10:00 ET around the first business day of the month (data for two months prior).
Raw Data Available At: http://www.census.gov/ftp/pub/indicator/www/m3/index.htm.

Factory orders consist of the earlier announced durable goods report plus non-durable goods orders. The report is very predictable with nondurables the only new component. Nondurables consist of such items as food and tobacco products which grow at a fairly consistent monthly rate, so that market forecasts for this report are far more accurate than for the durable orders report. In addition to seeing nondurables for the first time, the market also watches for revisions to the durable orders data, which can be significant. At present, durable goods orders sum to about 54% of total orders.

The final piece of new information in this report is factory inventories -- the first glimpse at the inventory picture each month (wholesales inventories are typically released a week later, with retail inventories released a few days after wholesale inventories). Though the inventory figure is not a market-mover, economists use this number to help forecast inventories in the quarterly GDP report.

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