Factory Orders Show General Weakness

A monthly upswing for aircraft made for a 2.3 percent jump in August factory orders that masks, however, general weakness in the report. Commercial aircraft orders surged 69 percent with defense aircraft up 17 percent. But excluding these as well as a jump in ships & boats and a 1.0 percent rise in motor vehicles, factory orders in August managed only a 0.1 percent gain.

The split between durables and nondurables shows the former, again inflated by aircraft, at 4.4 percent (revised from last week's advance reading of 4.5 percent) and the latter up 0.2 percent as gains in beverages and paper offset weakness elsewhere.

The major negatives in the report are in core capital goods (nondefense ex-aircraft). Orders here fell 0.9 percent though follow strong gains of 1.5 percent and 0.8 percent in July and June. Shipments for core capital goods, which are inputs into third-quarter GDP, fell 0.2 percent but again follow strong prior gains including a 1.2 percent jump in July that will help GDP.

Unfilled orders are a major positive in the report, jumping 0.9 percent in August and reflecting gains through the transportation group and also the metals group where tariff-related pre-buying is likely in play. Total inventories fell 0.1 percent but, like so many other readings, follow gains in prior months.

August may have been a good month for transportation equipment but it really was a flat month for manufacturing as a whole. Today's report closes the book on the August factory sector with the industrial production report the week after next opening the next round of definitive factory data for September.