Manufacturing Appears to Have Expanded in September

Manufacturing appears to have expanded in September 2010.  The headlines from the U.S. Census Bureau report:

New orders for manufactured goods in September, up three consecutive months, increased $8.8 billion or 2.1 percent to $420.0 billion, the U.S. Census Bureau reported today. This followed a slight August increase.  Excluding transportation, new orders increased 0.4 percent.

Shipments, up two of the last three months, increased $1.7 billion or 0.4 percent to $418.2 billion. This followed a 0.2 percent August decrease.

Unfilled orders, up six consecutive months, increased $8.0 billion or 1.0 percent to $813.5 billion. This followed a 0.2 percent August increase. The unfilled orders-to-shipments ratio was 5.64, up from 5.61 in August.

Inventories, up eight of the last nine months, increased $3.5 billion or 0.7 percent to $531.2 billion. This followed a 0.4 percent August increase. The inventories-to-shipments ratio was unchanged at 1.27.

Econintersect uses unadjusted data to evaluate this data – and the unadjusted data more-or-less confirms the implications of the headlines.  It should be pointed out, however,  that the seasonal adjustment factor are very suspect.  There is no way, with any certainty – that anyone can any assume any exact percentage of improvement.  First a look at the unadjusted data graph.

At first glance, the unadjusted data does look better in September over August 2010.  If we do an deeper analysis, it is generally true that September increases over August, except in 2009 where the September was slightly lower.  Overall, the data supports the conclusion that new orders improved in September (but is still 6% below the 2008 peak).

Backlog (unfilled orders) is the true indicator of an expanding economy.  September shows a MoM improvement.  One month is not a trend. but the overall data shows manufacturing has a flat line trend indicative of an economy which has little growth.

Finally, a look at the tables shows most of the growth this month came from durable goods (highlighted) and transportation equipment (not highlighted) in the following table.  Part of the increase was supported by an increase in new car sales to a seasonally adjusted 12 million annual rate

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