Econoday Report: Factory Orders 3, 2005

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2005 U.S. Economic Events & Analysis

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Factory Orders

Definition
Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month. Why Investors Care

Released on 11/3/05 For Sep 2005

Factory Orders, M/M change
Actual	-1.7%
Consensus	-1.0%
Consensus Range	0.0% to -3.0%

Highlights
Factory orders declined 1.7 percent in September, reversing more than half of August's 2.9 percent increase, but were generally in line with expectations. Durable goods orders declined 2.4 percent while new orders for nondurable goods decreased a more moderate 0.9 percent. The transportation sector contributed to the drop - excluding this volatile sector, factory orders fell a more moderate 1 percent. Given the typical seesaw pattern in new orders, the September drop is not terrible news for the economy, but factory orders have risen more slowly this year, on average, than in the two previous years and this causes the industrial sector - production and employment - to be weaker also.

Factory shipments declined a more moderate 0.5 percent and unfilled orders rose 0.7 percent. A rising level of unfilled orders bodes well for production since it shows that manufacturers have work in the pipeline. Inventories declined 0.1 percent for the month.

Several key reports are being released today and market players will be weighing their total impact on the economy. While this report is less than stellar, the ISM non-manufacturing survey showed improvement in activity in the month of October suggesting that the economy keeps on chugging.

Market Consensus Before Announcement
Factory orders rose 2.5 percent in August, boosted by a gain in durable goods orders. Given the 2.1 percent drop in durable goods orders in September, total orders will decrease as well, although to a lesser degree.

Factory orders Consensus Forecast for Sept 05: -1.0 percent
Range: 0.0 to -3.0 percent

Trends

Even though monthly shipment data fluctuate less than new orders, both series show underlying trends more clearly by looking at year-over-year changes. In 2000, shipments didn't rise as rapidly as new orders, but neither did they fall as sharply in 2001! Orders and shipments were nearly in line in 2002.

Data Source: Haver Analytics

2005 Release Schedule

Released On: 1/4 2/3 3/4 3/31 5/3 6/2 7/5 8/2 8/30 10/4 11/3 12/6

Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

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