Washington, DC, October 4, 2006--New orders for factory goods were unchanged in August after a 1% drop in July, the Commerce Department reported Wednesday.
Orders for both durable goods and nondurable goods were flat in August, as well. Declines in orders for petroleum, civilian aircraft, electronics and machinery were offset by higher demand for defense airplanes, ships, pesticides and tobacco, the government said.
A week ago, the government had estimated that orders for durable goods fell 0.5%. The upward revision was due in large part to smaller decline in orders for computers.
Economists were looking for a 0.1% decline in factory orders in August.
July's orders were revised lower to a 1% drop from a decline of 0.6% earlier.
The report points to a softening of growth in the factory sector, consistent with the decline to 52.9% in the Institute for Supply Management index for September reported on Monday. The orders and shipments data are very volatile month-to-month, however.
Orders for factory goods are up 7.3% year-to-date, while shipments are up 6.9%. The figures are not adjusted for price changes.
Shipments of factory goods increased 1.1% in August after falling 0.1% in July. Shipments of durable goods rose 2.1%, revised from 1.9% estimated a week ago. Shipments of nondurable goods are by definition identical to orders; they were flat.
Shipments of core capital equipment rose 0.7%, after a 1.5% gain in July, a sign that business investment likely will make a moderate contribution to third-quarter growth after a surprising decline in the second quarter.
Inventories of factory goods increased 0.3, the seventh increase in the past eight months. The inventory-to-shipments ratio stayed at 1.17 in August.
Unfilled orders - a gauge of future production - increased 0.4%, the 15th increase in the past 16 months.
Demand and production of nondurables was understated in the report. The 3.7% drop in orders and shipments of petroleum was due to falling prices, not falling demand. Orders increased modestly for food, beverages, tobacco, paper, chemicals and plastics.
In the durable sector, most industries reported weaker demand. Orders for electronics fell 2.9% (revised from a 4.7% decline previously reported). Orders for transportation goods rose 4%, including a 0.7% rise in autos, and 78% increase in ships and a 10.1% increase in defense aircraft, offsetting a 21.7% drop in orders for civilian aircraft.
Orders excluding transportation fell 0.7% after rising 0.6% in July.
