Factory orders rose +2.3% MoM (consensus +2.5%) in December, the largest monthly increase since July, and the fourth consecutive monthly pick-up in new orders. In addition, November's growth was revised higher to +1.7% from +1.5% initially reported.
The improvement is based on export growth, defense spending, and rising investment on new equipment, excluding the construction industry. Export shipments were at a record high in December. Durable goods orders rose 5%, mainly due to strong aircraft demand (+12% MoM). Auto demand fell -2.8% MoM, and indicates automobile inventories and production may continue to be a drag on the economy in 2008, as consumer spending retrenches. Vehicle sales fell to the lowest level since 2005 in January. Excluding transportation equipment, new orders rose +.7% MoM. Non-durable demand fell -.4% MoM on lower petroleum prices. Excluding petroleum, non-durable orders rose +.3% MoM.
Capital goods orders rose +11.3% MoM, while non-defense new orders rose at half the pace, or +5.5% MoM. Defense orders grew an enormous 82% MoM.
Orders for non-defense capital goods excluding aircraft rebounded +4.5% MoM in December, after shrinking -.1% in November. This figure is important because it is viewed as a good proxy for future business spending. Shipments of this category are used in determining GDP, and they also rebounded well, rising +1.9% MoM after only increasing by +.1% MoM in November.
Overall, shipments fell -.3% MoM, the first decline since August. Inventories rose +.8% MoM and are up +3.6% YoY. Manufacturers' inventory-to-shipments ratio rose to 1.24 from 1.22 months in November. Unfilled orders continue to rise, increasing +2.5% MoM and +18.2% YoY.
From December of 2006 to December of 2007, new orders rose +6.1% YoY, with ex-transportation up +5.9% and ex-defense +5.3%. Capital goods orders rose +10.6% YoY with defense surging +89% YoY and non-defense rising +4.5% YoY. Durable goods orders rose +3.5% YoY. Shipments have risen +4.1% YoY while inventories have grown +3.6% YoY.
Net, the gains were more broadbased this month, but still heavily influenced by the volatile aircraft and defense sectors. A weakening dollar should help support continued export growth by US manufacturers. The growth in inventories is likely to raise some concern, though it may be associated with the growth in unfilled orders, which would be less of a concern. The smaller growth in non-durable inventories may cause 4th quarter GDP to be reduced slightly.
No comments:
Post a Comment