U.S. Factory Orders Fall For Third Straight Month

[Purveyor]

Source: REUTERS

(Reuters) - New orders for U.S. factory goods fell for a third straight month in October, pointing to a slowdown in manufacturing activity.

The Commerce Department said on Friday new orders for manufactured goods declined 0.7 percent after a revised 0.5 percent drop in September.

Economists polled by Reuters had forecast new orders received by factories would be unchanged after a previously reported 0.6 percent fall in September.

There are conflicting signals on the manufacturing sector, with the so-called hard data suggesting a cooling in activity, while sentiment surveys point to a building of momentum.

Read more: http://www.reuters.com/article/2014/12/05/us-usa-economy-factory-idUSKCN0JJ1JS20141205

[merrily]

1. Decrease in US factory orders is one thing. Decrease in US factories is another.

[Moosepoop]

2. I don't understand this part

Factory orders excluding the volatile transportation category dropped 1.4 percent in October after being flat for two straight months.

Unfilled orders at factories increased 0.4 percent in October. Order backlogs have increased in 18 of the last 19 months. Inventories edged up 0.1 percent, while shipments fell 0.8 percent.

New orders dropped, yes, but older orders remain unfilled. Why?

And could it be that new orders have dropped because the older ones remain unfilled?

[whatthehey]

4. Depends on production environment

Backlog is relevant to ETO/MTO (Engineer or make to order) companies like shipbuilding, civil engineering, custom machining etc. They can have backlogs of months of work that need a stream of new orders to keep the "funnel" full, while still taking long lead times to complete backlog orders. Consumer goods tend to be MTS or make to stock in supply, and ship either from inventory or with very short assembly times (think Dell). Since this is an aggregate report that at least at this summary level does not distinguish by environment, companies will answer based on what they use, either backlog or inventory. Backlogs up and new orders down would normally indicate a throughput slowdown at an individual level, but at the aggregate level there really is no clear reason as companies fulfill, and report, orders in many different ways. It could be order cycle, slowdown (although jobs report would comflict here) or simply an industry distribution where long term ETO/MTO companies are seeing growing orders for capital equipment etc (a global market) but ATO/MTS consumer goods companies are seeing lower orders to ship from inventories; hence both backlog and inventories increase.

[Moosepoop]

5. Thank you for the informative reply!

I do wish that the report would differentiate between environments, it would help to understand the big picture.

Thanks again!

[Elmer S. E. Dump]

3. Less and less people can afford what they are manufacturing?

Resulting in even more layoffs. A never-ending swirl to the bottom of the bowl.

[NorthCarolina]

6. Exactly what ARE all these "US manufactured goods", and why

can't I find them at my local store?

[Psephos]

8. US mfg is predominantly not focused on the retail consumer space n/t

[Odin2005]

7. Classic pre-recession sign.

Keep on bragging about the "Obama Recovery", DLCers, you guys are about to eat crow.