Factory Orders Weak on Lower Oil Prices

Factory orders in October surprised somewhat on the downside but with weakness coming from nondurables-almost certainly from lower oil prices. Overall factory orders slipped 0.7 percent after declining 0.5 percent in September.

The durables component rose 0.3 percent compared to the original estimate of 0.4 percent and versus a drop of 0.7 percent in September. Nondurables orders fell 1.5 percent in October, following a 0.2 percent dip the month before.

Shipments were down in October but again weakness was mainly in nondurables. Shipments fell 0.8 percent in October after a 0.1 percent rise in September. In the latest month durables edged up 0.1 percent while nondurables dropped 1.5 percent. Within nondurables shipments, petroleum and coal product fell a monthly 6.3 percent-a likely price-related effect.

Inventories remain in balance, rising only 0.1 percent in October after a 0.2 percent gain in September.

Manufacturing remains on a recent low but positive trajectory after price effects are taken into account. There may be improvement ahead in this sector after a favorable employment number in manufacturing for November.

Recent History Of This Indicator:
Factory orders have not been much better than flat, a trend that didn't improve in September when orders fell 0.6 percent. The durable goods component, first posted last week, has been revised slightly higher but is still in the minus column at 1.1 percent vs a preliminary minus 1.3 percent. Weakness on the durable side is broad and includes special weakness in capital goods categories which points to weakness in business confidence and business investment.

The non-durable goods component is the new data in the latest report and was unchanged in September following declines of 0.4 percent and 0.8 percent in the two prior months. The price plunge for oil is certain to drag down petroleum subcomponents in the October report.