Manufacturing Green Shoot Turns into Tree in January 2011

The only point of contention in analyzing manufacturing data for January 2011 is the size of the growth – the US Census says manufacturing new orders grew 3.1% vs Econintersect’s calculation of 2.0%.  Whatever this number, new orders are strong against very strong 1Q2010 growth.

Manufacturing is truly much more then a green shoot – it is providing consistently strong YoY performance for over a year now.  Excepting a bubble higher in early 2010, manufacturing new orders have shown continuing year-over-year growth of $30 -$40 billion per month.

If not for the distortions in seasonal adjustments due to the Great Recession – likely Econintersect would even agree on this point as manufacturing is really strong – showing no signs of fatigue.  The headlines:

New orders for manufactured goods in January, up six of the last seven months, increased $13.6 billion or 3.1 percent to $445.6 billion, the U.S. Census Bureau reported today. This followed a 1.4 percent December increase. Excluding transportation, new orders increased 0.7 percent.

Shipments, up five consecutive months, increased $8.1 billion or 1.8 percent to $447.4 billion. This followed a 2.7 percent December increase.

Unfilled orders, up nine of the last ten months, increased $4.8 billion or 0.6 percent to $829.6 billion.  This followed a 0.2 percent December decrease. The unfilled orders-to-shipments ratio was 5.60, up from 5.55 in December.

Inventories, up twelve of the last thirteen months, increased $7.1 billion or 1.3 percent to $559.3 billion. This followed a 1.4 percent December increase. The inventories-to-shipments ratio was 1.25, down from 1.26 in December.

Econintersect uses unadjusted data which is different than the seasonally adjusted data used in the headlines.

The good news continues with manufacturing backlog’s gradual but quite smooth upward trend.  This is telling us that capacity is matched to the economic conditions, and that the manufacturing sector is really growing.

A final note – inventory levels are great.  Even though the inventory levels are rising, they are not rising as fast as shipments – with the inventory to shipment ratios continuing to decline.

Overall a great month for manufacturing.

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