Tuesday, December 5, 2006

ISM Up (sort-of); Manufacturing Shipments Down

From the ISM

Business activity in the non-manufacturing sector increased at a faster rate in October 2006, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

OK -- but there are issues in the report that I don't like. First, new orders dropped .7 and employment dropped 2.6. That doesn't look good. More importantly, inventories increased 2.5. This might slow activity in the coming few months.

From the Census

New orders for manufactured goods in October, down three of the last four months, decreased $19.3 billion or 4.7 percent to $390.3 billion, the U.S. Census Bureau reported today. This was the largest decrease since July of 2000 and followed a 1.7 percent September increase. Shipments, up two of the last three months, increased $0.4 billion or 0.1 percent to $389.9 billion. This followed a 4.2 percent September decrease. Unfilled orders, up seventeen of the last eighteen months, increased $8.2 billion or 1.2 percent to $666.5 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 4.1 percent September increase. The unfilled orders-to-shipments ratio was 4.56, up from 4.46 in September. Inventories, up twelve of the last thirteen months, increased $1.8 billion or 0.4 percent to $481.1 billion. This followed a 0.6 percent September increase. The inventories-to-shipments ratio was 1.23, unchanged from September.

Now, the backlog of orders increased again. That could be a good sign. IN addition, the report notes "This was at the highest level since the series began and followed a 4.1 percent September increase." However, there are no numbers for the percent of cancellations in the report.

In addition, "Inventories of manufactured durable goods in October, up nine of the last ten months, increased $2.2 billion or 0.8 percent to $293.8 billion, unchanged from the previously published increase. This followed a 1.2 percent September increase." That's a long string of increases to think about.