U.S. factory orders rebounded by 1.4% month-on-month in August, but core shipments declined.
August US factory order data shows a rebound in manufacturing activity, but a decline in core shipments adds uncertainty to the outlook for economic growth.
The report released by the US Department of Commerce on Tuesday shows that factory orders rose 1.4% month-on-month in August, in line with market expectations, reversing a 1.3% decline in July. The rebound was mainly driven by a surge of 2.9% in durable goods orders, with transportation equipment orders soaring 7.9%.
(Factory orders rose 1.4% month-on-month in August)
However, core shipments—a key input for GDP calculations—fell 0.4% month-on-month, in contrast to a 0.6% increase in July. Non-durable goods orders also weakened, edging down 0.1% in August.
Market analysts point out that although this lagging set of data shows relatively robust manufacturing activity in August, its reference value for assessing the current economic situation is limited.
Factory orders rebound in line with expectations
The US Department of Commerce report shows that factory orders in August rose 1.4% month-on-month, matching economists’ expectations, and were up 3.8% year-on-year, reversing the 1.3% drop in July and improving on the larger decline in June.
The strong performance of durable goods orders was the main driver of the overall rebound. Durable goods orders surged 2.9% in August, after plummeting 2.8% in July. Transportation equipment orders jumped 7.9% in August, offsetting a sharp 9.3% drop in July.
Core factory orders (excluding transportation equipment) only increased 0.1% month-on-month, lower than the overall rise in durable goods orders, but still grew 1.53% year-on-year. This indicates that, excluding the highly volatile transportation equipment sector, manufacturing orders grew moderately.
Decline in core shipments draws attention
Although order data was relatively decent, indicators of manufacturing shipments showed more signs of weakness.
Manufacturing product shipments fell 0.1% month-on-month in August, ending a 0.9% growth streak from July.
More noteworthy is that core durable goods shipments (excluding transportation equipment) declined 0.4% month-on-month, after a 0.6% increase in July. As an important input to GDP calculations, a decline in core shipments may negatively impact third-quarter economic growth forecasts.
As for inventories, manufacturing product inventory in August was basically flat, after a slight 0.2% growth in July. The US Department of Commerce stated that the inventory-to-shipments ratio in August was 1.56, unchanged from July, indicating that inventory pressures have not significantly changed.
Non-durable goods orders fell 0.1% month-on-month in August, while they had grown 0.3% in July.
Lagging data limits market reference value
Market analysts point out that the lagged release of August data weakens its usefulness in assessing the current economic situation.
With the August data released in November, a three-month gap makes it difficult to fully reflect the latest economic dynamics and market changes.
Core durable goods orders have maintained robust growth for five consecutive months, increasing 0.3% month-on-month in August, slightly below the 0.4% forecast. This relatively stable performance shows that, excluding the volatile transportation equipment sector, manufacturing order activity remained resilient in August.
(Core durable goods orders (excluding transportation equipment) rose 0.3% month-on-month)
Although overall data for August was solid, the lagging factor makes this set of data of limited guidance for investors assessing the current state of manufacturing. The market is more focused on upcoming recent data to better grasp economic trends and the outlook for monetary policy.
Risk Disclosure and DisclaimerThe market has risks, and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account specific investment objectives, financial situations, or needs of any particular user. Users should consider whether any opinions, views, or conclusions presented herein suit their particular situation. Investment decisions based on this are at your own risk.