Factory orders decrease for first time in six months

By Richard Foster-Shelton
Medill Reports

The U.S. Census Bureau announced new orders for manufactured goods in January were $491.7 billion, a decrease of $6.9 billion or 1.4 percent from December’s $498.6 billion. The month-to-month decrease comes after five consecutive monthly increases from July to December.

Unfilled orders dropped to $1.14 trillion from $1.44 trillion, a 0.3 percent decrease. The decline follows four consecutive monthly increases.

Beyond new and unfilled orders, other measures increased.

Shipments, up 13 of the last 14 months, increased $2.8 billion or 0.6 percent to $498.8 billion. This follows a 0.6 percent increase from November to December.

Inventories rose to $674.2 billion, an increase of $2.1 billion or 0.3 percent from December’s $670.3 billion.

Source: U.S. Census Bureau

While the decrease in new orders is not good for the industry, Ball State University economist Michael Hicks sees no reason for panic.

“It’s a little disappointing but this is one of many data points about manufacturing. This data doesn’t scare me because the other data points are all positive,” Hicks said. “Even in a solid manufacturing recovery stage you can have a bad month. One down month in January is not reason for alarm given the previous data is robust for manufacturing. I wouldn’t be worried until I saw 3 or 4 months.”

Hicks suggested several possible explanations that could not only explain the down month but also give hope for next month.

“It could be survey error from a fairly small survey of manufacturers or seasonal adjustment measures,” Hicks explained. “It’s possible that some businesses ordered extra stock in December and are trying to even things out. If that’s true, we could possibly see a strong February.”

Photo at top: An orderly modern warehouse (Creative Commons)