Manufacturing Sector Shows Signs Of Improvement
August 31, 2001
The manufacturing sector may be starting to show new signs of life. The U.S Commerce Department reported Friday morning factory orders increased 0.1% in July, while shipments were up 0.5% and factory inventories fell 0.6%.
The increase in factory orders was far better than analysts were predicting in a Reuters poll. They were expecting a 0.5% drop for the month.
For trucking, the news is much more encouraging than figures this week showing that the gross domestic product was stalled and consumer spending was the lowest in several months.
Newport Communications Senior Economist Jim Haughey said everything for the month moved in the right direction.
“Both February and May had similar improvements that were reversed the next month. This time, the uptrend is more likely to be sustained, because manufacturers have a clearer picture of future market conditions and inventories have been substantially reduced. Manufacturing gains will be slow and erratic for the rest of the year because export demand continues to slide. Most European and Asian economies are not as far along in their manufacturing recessions as is the U.S.”
Leading the increase in factory orders was a demand for electrical and transportation equipment. Transportation orders increased 0.9%. Within this sector, orders for motor vehicles, parts and trailers increased 2%, while defense aircraft and parts spending shot up 6.6%. Electrical equipment orders were led by a demand for household appliances, increasing 1.2%. In contrast, things were not as good in the technology arena, with the demand for computers and electronics products slipping 4.5%.
The inventory/sales ratio fell from 1.40 to 1.38, which according to Haughey is still almost two days of extra inventory. “Much of it is concentrated in the semiconductor and telecommunication equipment sectors, the only ones still clearly declining.”
Nondurable good shipments, which generate most of their freight for motor carriers, increased a strong 1.1%, with food up 1.2% and chemicals up 1.6%.
Heavy-duty truck sales fell 6.1% after dropping 15% in the previous two months. “The rapid decline caused inventory at truck manufacturers to rise slightly," Haughey says. "This was probably unintended, since inventories have declined only half as much as shipments over the past year.”