Econoday Economic Report: Factory Orders April 2, 2009

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Factory Orders

Released On 4/2/2009 10:00:00 AM For Feb, 2009

	Prior	Consensus	Consensus Range	Actual
Factory Orders - M/M change	-1.9 %	1.5 %	-1.2 % to 4.2 %	1.8 %

Highlights
Factory orders rose a very solid 1.8 percent in February in a gain driven by a 3.5 percent jump in durables and including a 0.3 percent rise in nondurables. The rise in durables, as first released last week in the durable goods report, showed wide gains across components though against easy comparisons with very weak January data. The new data in today's report is on non-durable goods which were boosted by orders for chemicals. The ongoing price rise in oil, back above $50 this morning, points to price-related increases underway for many petroleum and petroleum-related products.

But the good news in the report does not extend to factory shipments which slipped back 0.1 percent, setting an unwanted record of seven straight declines. The level of shipments, at $365.9 billion in February, continues to lag the level of new orders, at $352.2 billion, a mismatch that points to declining activity ahead. Inventories, down 1.2 percent, are falling but probably not fast enough especially following yesterday's ISM report for March where many more purchasers said inventories are too high.

The durable goods report for March, to be released Friday, April 24, looks to be the most closely watched durable goods report of the recession. Yesterday's ISM report, which showed incremental month-to-month improvement with significant improvement in new orders, suggests that orders for durable goods may show a second month of gains. Stocks and the dollar firmed very slightly in reaction to today's data.

Market Consensus before announcement
Factory orders fell 1.9 percent in January. Helping ease the decline was 0.5 percent boost in nondurable orders - a gain tied to higher oil prices. Looking ahead, we should see a smart rebound in February as durable goods orders rebounded a strong 3.4 percent in February. Further gains in oil prices also should boost the nondurables component.

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

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 2005 for example,new orders rose more rapidly than shipments due to large gains in aircraft orders. Aircraft orders have a long lead to shipment.
Data Source: Haver Analytics

2009 Release Schedule

Released On: 1/6 2/5 3/5 4/2 5/1 6/3 7/2 8/5 9/2 10/2 11/3 12/4

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