Better Job Report Backs Rate Hike In December
US factory orders rose 1.5% in October
With an increase in orders for durable goods, new orders for factory goods increased $6.8 billion or 1.5% to $473.9 billion in October 2015. Though factory orders rose in October, the SPDR Dow Jones Industrial Average ETF (DIA) fell 1.4% as of December 3. The DIA lost 2.1% over the past month. This is mainly because the market is reacting negatively after the Fed Chair Janet Yellen’s hawkish stance on the rate hike.
Farm and construction machinery fell in September
Following a two-month consecutive fall, new factory orders have increased with a rise in durable goods by 2.9% in October, whereas non-durable goods remained virtually unchanged. Transportation equipment led the increase by 7.9% to $82.0 billion in October. The rise in orders may positively impact stocks like Deere & Company (DE), Caterpillar (CAT), PACCAR (PCAR) and Cummins (CMI).
Unfilled orders rose
Unfilled orders that represent orders to manufacturers that have yet to be filled and shipped also rose $3.4 billion or 0.3% to $1,191.8 billion. Since the economy is growing modestly, the order backlog is minimal, and factories have enough production capacity to meet demand. In October, shipment fell $2.5 billion or 1.0% to $240.1 billion in October.
Factory inventories fell by 0.3% in October
Factory inventories represent about 45% of all business inventories, with wholesale and retail filling up the rest. With demand growing modestly, manufacturers are cautious about holding stocks of inventories. In October, inventories fell $1.0 billion or 0.3% to $397.0 billion. Primary metals, down for nine consecutive months, led the fall by $0.3 billion or 0.9% to $35.7 billion.
Though data on US factory orders show a rise, the data comes with a time lag. In fact, recently released Markit data and ISM data on manufacturing highlight a fall in new orders and production levels.
Along with factory orders, it’s also important to understand the labor market condition in the economy. Let’s take a look at data on the employment situation in the next article.
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