U.S. Factory Orders Rise Modestly in May, a 3rd Moderate Monthly Gain

Manufacturers’ new orders gained 0.3% (-1.0% y/y) in May, the same size increase as in April, which was revised down marginally from 0.4%, according to data from the U.S. Census Bureau. The Action Economics Forecast Survey expected an 0.8% advance for May. The May result is the third successive monthly increase. Excluding transportation, total orders fell 0.5%, with the decrease coming in nondurable goods industries.

New orders for durable goods advanced 1.8% (+5.5% y/y) in May, following gains of 1.2% in April and 3.3% in March. Virtually all major durable goods industries had gains in their orders in May, with transportation the largest at 3.8% (+17.6% y/y); the transportation increase came in nondefense aircraft and ships and boats. Transportation industry orders were up 4.8% in April. Orders for electrical equipment rose 1.9% (+6.2% y/y) in May after a decline of 2.8% in April and machinery orders increased 1.2% (+0.9% y/y) in May following 0.4% in April. Other sectors had more moderate gains, but they were all up in May.

The decrease in nondurable goods industry orders – which by definition equal nondurable goods shipments – was 1.2% (-6.7% y/y) in May following a 0.7% decline in April. Orders (and shipments) for petroleum and coal products were down 5.0% (-26.1% y/y) in May after falling 1.2% in April; within that sector, petroleum refineries had a decrease of 5.5% (-27.9% y/y) after decreasing 1.3% in April. Other sizable declines came in apparel, down 1.4% (+6.2% y/y) in May and leather and allied products down 1.2% (+3.0% y/y). There was a notable increase in May in beverages & tobacco products, 1.1% (+11.4% y/y), and the only other sector with a positive move was plastics & associated products, up just 0.1% (-3.2% y/y).

Manufacturers’ total shipments rose 0.3% (-1.9% y/y) in May, partially rebounding from a 0.6% fall in April and similar decreases in March and February. While, as noted, nondurable goods shipments fell 1.2% in May, shipments of durable goods advanced 1.8% (+3.5% y/y) after a 0.6% decrease in April. As with new orders, shipments of transportation equipment had the strongest industry performance, up 4.8% (+10.4% y/y) following a 1.6% decrease in April. All other industry sectors had increases except furniture, for which shipments fell 1.4% (+6.3% y/y) after declining 0.9% in April. Shipments of electrical equipment rose 1.0% (+7.4% y/y) in May after falling 1.1% in April. Machinery shipments increased 0.6% (+3.0% y/y) in May following an 0.8% rise in April. There were smaller increases in other durable goods sectors.

Unfilled orders were up 0.8% in May, the same size increase as in April, with those two months showing the largest increases since January of 2022. The year-to-year advance in May was 5.6%. Durable goods industries had, by definition the same size increase as the total. The largest increase was in the transportation sector, 1.3% (+9.5% y/y) almost the same as April’s 1.4% rise. Electrical equipment had a marginal increase of 0.1% (+3.4% y/y) after a 0.2% rise in April. All other durable goods sectors saw modest decreases in May, ranging from 0.4% for furniture & products to less than 0.1% for other durable goods industries, that is, virtually zero.

Manufacturers’ inventories edged lower by 0.2% (+0.5% y/y) during May after a 0.3% increase in April. The inventory/shipment ratio was 1.491 at the end of May after 1.498 for April, very marginally higher than the recent “low” of 1.450 in June 2022. Durable goods industries saw a 0.2% increase in their inventories in May after a 1.0% surge in April while nondurable goods industries’ inventories fell 0.9% after a 0.6% decrease in April.

The factory sector data are available in Haver’s USECON database. The Action Economics Forecast Survey is in the AS1REPNA database.