October Factory Orders Dip Offset by September Revision
A Bloomberg survey had expected October factory orders would fall 0.8%. When combined with August's unchanged orders tally, factory orders for the last three-month averaged a 0.7% gain -- still indicative of an industrial expansion.
Further, excluding the often-volatile transportation component, factory orders dipped just 0.2% in October, after a revised 1.3% increase in September, substantially better than the initially estimated 0.4% gain for September. The component rose 1.3% in August. Economists emphasize the ex-transportation component because it provides a more-accurate measure of core industrial conditions.
Excluding the defense component, factory orders dipped 0.1% in October, after rises of 2.8% and 0.1% in September and August, respectively.
Computer/Electronic, Transportation Orders Plunge
In October, by category, computer/electronic product orders plunged 7.9%, transportation equipment plunged 5.2%, furniture orders fell 4.9%, machinery orders sank 3.7%, appliances declined 3.5%, durable goods decreased 3.4%, primary metals orders fell 0.6%, and fabricated metals declined 1.5%. Non-durable goods orders rose 1.5%.
Economists follow the factory orders statistic because it provides one of the most comprehensive surveys of advance orders for durable goods - - 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. However, economists also caution investors not to put too much emphasis on the initially released factory order monthly stat, as the total -- which October's report demonstrated -- typically is revised in subsequent monthly reports as more-complete data becomes available to the government.
October Orders Dip, but Industrial Expansion Continues
October's factory orders report is not for novices, or those unfamiliar with key U.S. economic data. True, the top-line stat declined, but the substantial, upward revision in September's tally, combined with the still-strong ex-transportation component, reveals a manufacturing sector that's still expanding.
Further, provided the dollar does not strengthen by an export-altering amount against the world's other major currencies -- more than 10%, and that's not likely -- strong U.S. exports should keep both factory orders strong and the manufacturing sector as a major growth engine of the U.S. economic expansion.