Factory Orders Flatline: Manufacturing Outlook Gets Cloudy

Manufacturing

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New orders for manufactured goods effectively flatlined in October, according to the U.S. Census Bureau. Total new orders for manufactured goods excluding transportation equipment edged up insignificantly (less than 0.005 percent) for the month to $413.7 billion. Including transportation equipment, total new orders actually fell 0.9 percent on the month to $486.9 billion.

Orders for transportation equipment are typically stripped out of “core” measures of factory orders because they tend to fluctuate dramatically from month to month. Taken alone, new orders for transportation equipment fell 5.7 percent on the month in October, which follows a 13.1 percent increase in September and a 1.8 percent increase in August. Transportation equipment orders are up 8.1 percent on the year, fueled by strong growth in both motor vehicle parts and non-defense aircraft.

The factory orders data are interesting — and underwhelming — because of generally optimistic reports on the manufacturing sector released earlier this week, which showed that manufacturing conditions in the United States continued to improve in November.

Each purchasing managers’ index is determined by conducting a survey of industry executives, and a reading above 50 indicates growth. The ISM Manufacturing Report on Business showed a 0.9 percentage point increase in its headline PMI, from 56.4 to 57.3, indicating accelerating growth. The new orders component jumped 3 points to 63.6, production climbed 2 points to 62.8, and employment grew 3.3 points to 56.4.

Markit’s U.S. Manufacturing PMI climbed 2.9 points to a 10-month high of 54.7, also indicating accelerating growth. The output component jumped 6.8 points to 57.3, new orders climbed 3.5 points to 56.2, and employment decreased 0.4 points to 52.3.

Markit chief economist Chris Williamson noted that U.S. manufacturing has continued to grow despite fiscal uncertainty, economic malaise, and the partial government shutdown. “Large companies are leading the upturn, having escaped the impact of the shutdown, with output and new orders growth rending higher in recent months,” Williamson said in the Markit report. “SMEs suffered a bigger shutdown impact, but saw growth rebound again in November. Similarly, while employment rose in SMEs, it is larger firms that are driving job creation.”

Don’t Miss: Labor Market Suffers Through Ongoing Job Cuts in November.