Factory Orders Mixed

Today's factory orders report, down 1.4 percent at the headline level but showing life underneath, closes the book on what was a mixed to soft month of January for manufacturing. Aircraft has been a bright spot for the factory sector and mitigates what is a 28 percent downswing in January. Excluding transportation equipment, where aircraft and also motor vehicles are tracked and which were also weak with a 0.5 percent decline, factory orders fell 0.3 percent but follow impressive 0.8 and 0.4 percent gains in the prior two months.

The split between the report's two main components shows a 0.8 percent rise for nondurable goods -- the new data in today's report where strength is tied to petroleum and coal -- and a 3.6 percent drop for durable orders which is 1 tenth less weak than last week's advance report for this component.

Orders for computers and consumer products are highlights of the report as is a 0.6 percent rise in total shipments. But shipments of core capital goods (nondefense ex-aircraft) are not part of the good news, falling 0.1 percent in the month for a 2 tenth downward revision from the initial reading and which gets business investment off to a slow first-quarter start. And orders for January core capital goods are revised 1 tenth lower to a 0.3 percent decline that follows December's 0.5 percent dip.

Unfilled orders are another of the report's weaknesses, down 0.3 percent in a reading that, unlike regional and private surveys, does not point to capacity stresses nor immediate inflationary risks.

This report is a reminder that not all the data on the factory sector are strong and underscores the second straight no change reading in the manufacturing component of the previously released industrial production report for January.