New Orders, Shipments and Unfilled Orders of Durable Goods Decrease at Nation's Factories in August

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Researched by Industrial Info Resources (Sugar Land, Texas)--Economic recovery has been hard to come by at factories across the United States. Gains have been made this year, and the heavy consolidation and closing of facilities that occurred earlier in 2010 has wound down as companies reach the point of maximum contraction within their operations. With fewer factories across the board, companies have been able to increase production at their plants to meet demand. However, new orders have begun to dry up as the overall economic situation has not dramatically improved, and that has led to decreases in shipments and unfilled orders among those plants that manufacture durable goods.

With fewer orders arriving, less shipments are made at the other end of the factory, which enables manufacturers to catch up on their list of unfilled orders. However, this is not a good sign for the durable goods sector, as this means that in the near future, companies will have trouble keeping workers employed unless additional new orders are obtained. Orders have been decreasing for three of the last four months, with July being the lone exception.

Shipments have also been down during the same period, while unfilled orders have followed suit, with four consecutive months of increases, which has indicated factories have had plenty of work to perform. If companies can procure additional new orders in the coming months, the balance of the year should turn out okay, but that may prove difficult given the overall economic situation affecting business in the U.S.

There have been orders gained in some key areas, but this has been offset by serious declines in the ever-volatile transportation sector. Ferrous metal foundry orders were up 5.1% in August, while orders for mining, oil field and gas field machinery saw a significant increase of 18.7% for the month. Increases were also seen in the photographic equipment sector (5.6%), industrial machinery sector (8.8%), HVAC and refrigeration equipment sector (7%), metalworking machinery sector (7.8%), turbines, generators and other power transmission equipment sector (23.4%), the computers sector (19.2%), and the nondefense communications equipment sector (12.4%).

The most significant declines were seen in the nondefense aircraft and parts sector (-40.2%), material handling equipment sector (-20.4%), iron and steel mills sector (-5.1%), construction machinery sector (-3.5%) and the ships and boats sector (-7.4%). The transportation sector, which sees wild swings in orders monthly, once again caused the most problems for the month. Aircraft orders were significantly down in August and motor vehicle bodies, parts and trailers did not help matters by decreasing.

With construction spending remaining stable across the manufacturing industries and signs pointing to 2011 being a better year for overall economic recovery, it is only a matter of time for the overall situation to improve for durable goods manufacturers in the U.S. However, it could become difficult for these companies to maintain their level of manufacturing if additional orders do not materialize through the winter months. If orders continue to decrease, the country could be facing another round of consolidations and possibly plant closings among the manufacturers, just so they can remain in business until such time as total economic recovery is realized. The fact that orders figures for August increased by .9% if one excludes the transportation sector is a positive sign that things will not head downward in the near future, but the volatility of the transportation sector does not make it one you would bet your future on.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.