Slow February Spending: New Orders Decline; Shipments, Unfilled Orders, Inventories Increase

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Researched by Industrial Info Resources (Sugar Land, Texas)--Until February, spending in the United States had been steadily increasing as companies pulled out all the stops to keep the economy rolling forward on its path to recovery. After two years of caution, companies have reached a point where they must expand in order to stay ahead of the curve as production and capacity utilization improve. In the past 12 months, production at U.S. factories has increased nearly 7%, a significant sign of economic recovery. However, in February, spending took a dive while new orders continued their decline, and shipments, unfilled orders and inventories maintained their momentum with continued monthly increases adding more confusion to the outlook for the national economy.

Nationally, new orders decreased 0.9% in the month of February because of declines in a number of key sectors. The transportation, primary metals and machinery sectors all saw declines in total new orders for the month; this helped continue the downward trend in new orders, which have declined four of the last five months. On the brighter side, the fabricated metal products sector, along with the computers and electronic products sector and the electrical equipment, appliances and components sectors saw orders increase for the month. The nondefense aircraft and parts sector saw an increase of 26.7%, but this was countered by the 18.4% decrease in orders for defense aircraft and parts.

Shipments have increased for five of the past six months in the U.S. and were up 0.3% in the month of February. Shipments in the transportation equipment, machinery, and primary metals sectors saw significant gains, while the electrical equipment, appliances and components sector saw modest gains. Shipments were down for the month in the fabricated metal products sector and the computers and electronic products sector.

Unfilled orders have been on the rise, increasing 10 of the past 11 months, which indicates that factories are operating at higher and higher capacities, a good sign for recovery. In February, unfilled orders increased by 0.4%, the equivalent of $2.9 billion in orders. Chief among the sectors seeing gains in this important indicator were the fabricated metal products sector, the machinery sector, the computers and electronic products sector, the electrical equipment, appliances and components sector, and the transportation equipment sector. Only the primary metals sector saw a decrease, declining 2% for the month.

Inventories increased 0.9% in February, continuing the upward movement of this economic indicator, which has been on the rise for 14 consecutive months. All of the key sectors saw increases in inventories, with the primary metals sector leading the way with a 2% increase. The electrical equipment, appliances and components sector also saw significant gains, with a 1.2% increase in inventories, while the transportation equipment sector grew 0.9%, the machinery sector saw its inventories grow by 0.8%, and the computers and electronic products sector grew by 0.7%.

The numbers for March will not be out for several weeks and should be interesting. Industrial spending in March is expected to grow by close to 500% when compared to February, but with the intervention in Libya and the tsunami in Japan having significant impact on production numbers across the globe, there could be some significant changes in the new orders, unfilled orders, shipments and inventories numbers for the month. February appears to have been an anomaly when it comes to spending, but despite the low numbers for the month, there continues to be increases in several key indicators. The new order numbers should begin to increase in the coming months as well, especially once the fallout from the supply interruptions in Japan are fully realized. Recovery is still on its way, it may have simply taken a brief holiday for a few weeks in early 2011.

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.