U.S. Factory Orders Stay on the Uptrend in January

U .S. manufacturing continues to pick up steam, as factory orders rose 1.7% in January, boosted by a large increase in aircraft orders, the U.S. Commerce Department announced Thursday. Factory orders have now risen in eight of the last nine months. Also, the durable goods component surged 2.6% in January, after a 1.8% gain in December. Nondurable goods orders rose 0.9% in January, following a 1.3% gain in December.

A Bloomberg News economists survey had expected January factory orders to rise 2%, after increasing a revised 1.5% in December and 1% in November.

Excluding the often-volatile transportation component (which includes airplanes and cars), factory orders increased 0.1% in January after a revised 1.5% gain in December, and a 2.1% rise in November.

Inventories are also trending upward: They rose for the third time in four months, increasing 0.2% in January after an 0.2% dip in December, with the inventory-to-shipment ratio remaining unchanged at 1.29. Economists caution that the positive inventory trend has been short, but if inventories continue to increase, that would suggest businesses are becoming more confident about holding extra goods in expectation of rising sales.

Wholesalers Appear to Be Gaining Confidence

Here's the January the factory order breakdown by category: transportation equipment orders surged 15% (including a 118.6% leap in nondefense aircraft orders/parts and an 11.6% jump in defense aircraft/parts orders); primary metals orders increased 2.1%; computers/electronic products rose 1.8%; fabricated metal products dipped 0.5%; furniture fell 3.5%; and machinery declined 9.2%.

The factory orders statistic provides one of the most comprehensive surveys of advance orders for durable goods by indicating how busy factories are likely to be in the period ahead. Factory orders also are a major value-added component of the U.S. economy.

Even though the top-line January stat came in below the consensus estimate, factory orders still rose by a healthy amount, and the 2.6% increase in durable goods orders also is encouraging. Add the positive inventory trend, and the picture is one of wholesalers becoming more confident about taking on more products in anticipation of a continuing rising sales and economic expansion.