Manufacturing appears stable in July 2010 with the gentle decline of backlog continuing. The seasonal adjustment factors used in this month’s release again appears flawed. The release stated in part:
New orders for manufactured goods in July, up following two consecutive monthly decreases, increased $0.6 billion or 0.1 percent to $409.5 billion, the U.S. Census Bureau reported today. This followed a 0.6 percent June decrease. Excluding transportation, new orders decreased 1.5 percent.
Shipments, also up following two consecutive monthly decreases, increased $4.4 billion or 1.1 percent to $417.1 billion. This followed a 0.5 percent June decrease.
Unfilled orders, down following three consecutive monthly increases, decreased $1.1 billion or 0.1 percent to $802.8 billion. This followed a 0.1 percent June increase. The unfilled orders-to-shipments ratio was 5.53, down from 5.59 in June.
Inventories, up six of the last seven months, increased $5.1 billion or 1.0 percent to $526.0 billion. This followed a 0.1 percent June increase. The inventories-to-shipments ratio was unchanged at 1.26.
Seasonal adjustment factors are a mindless quantitative process. It depends which years are compared, and the methodology used to make the comparison. If you are comfortable reading charts, it is better just to observe.
I find it difficult to see any improvement in new orders, and am a little concerned comparing the July YoY. If you are a new normal type of person, you must discount pre-recession relationships. But in any event, the July figures seem ok. One month is not a trend anyway.
I could care less about inventories as it only relates to GDP (and not the real economy).
But I continue to be concerned with backlog. Backlog reduction means you still have some more people to fire, and it raises questions about the economic direction. It is a simple fact that backlog grows in an improving economy.