Manufacturing new orders are likely up slightly in August 2010 according to Econintersect’s review of unadjusted data. The confusion is caused by the seasonal adjustment factors being used which show a sharp divergence between the old and new normals.
The headline press release states in part:
New orders for manufactured goods in August, down three of the last four months, decreased $2.2 billion or 0.5 percent to $408.9 billion, the U.S. Census Bureau
reported today. This followed a 0.5 percent July increase. Excluding transportation, new orders increased 0.9 percent.
Shipments, also down three of the last four months, decreased $2.5 billion or 0.6 percent to $415.1 billion. This followed a 1.2 percent July increase.
Unfilled orders, down following four consecutive monthly increases, decreased $0.1 billion to $804.0 billion. This followed a slight July increase. The unfilled orders-to-shipments ratio was 5.59, up from 5.53 in July.
Inventories, up seven of the last eight months, increased $0.7 billion or 0.1 percent to $526.4 billion. This followed a 0.9 percent July increase. The inventories-to-shipments ratio was 1.27, up from 1.26 in July.
The following graph provides a good comparative view of manufacturing new orders:
How you view this data will depend on what is used as a comparison. An indisputable fact is the manufacturing remains well below its peak.
Comparison of July and August 2010 Results to Previous Years:
||Jul 2010||Aug 2010||MoM Improvement?|
The data shows that manufacturing improved MoM if we use 2008 and 2009 data, and falls MoM if we use 2005, 2006, and 2007 data. Econintersect believes that the comparison should be to the New Normal data.
But the red flags in the data are a rise in inventories and lower unfilled orders (backlog). Rising inventory is a sign that sales are lower than planned. Further, backlog is again on a downward trend – which began in May 2010 which demonstrates too much capacity and over production. If you take inventories and backlog together, you might be hearing faint recessionary warning bells.