Overall manufacturing fell 0.8% in June, new orders down 1.9%
posted at 10:45 am on August 3, 2011 by Ed Morrissey
Now that the debt-ceiling impasse has concluded, Barack Obama wants to go on a “jobs tour” through the Midwest:
The bruising debt fight behind him for now, President Barack Obama is planning a Midwest bus tour later this month that will focus on jobs.
The White House on Wednesday confirmed plans for the trip the week of Aug. 15 but didn’t release details.
That may be because they’ll have trouble finding the jobs out here. The latest report from Commerce on manufacturing shows the entire sector fell off by 0.8% in June, which follows a reported fall in the ISM index for July:
New orders for manufactured goods in June, down two of the last three months, decreased $3.8 billion or 0.8 percent to $440.7 billion, the U.S. Census Bureau reported today. This followed a 0.6 percent May increase. Excluding transportation, new orders increased 0.1 percent. Shipments, up following two consecutive monthly decreases, increased $1.0 billion or 0.2 percent to $444.3 billion. This followed a slight May decrease. Unfilled orders, up fourteen of the last fifteen months, increased $2.5 billion or 0.3 percent to $863.2 billion. This followed a 0.9 percent May increase. The unfilled orders-to-shipments ratio was 6.08, down from 6.11 in May. Inventories, up twenty of the last twenty one months, increased $1.4 billion or 0.2 percent to $594.4 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.8 percent May increase. The inventories-to-shipments ratio was 1.34, unchanged from May.
New Orders. New orders for manufactured durable goods in June, down two of the last three months, decreased $3.8 billion or 1.9 percent to $192.4 billion, revised from the previously published 2.1 percent decrease. This followed a 2.0 percent May increase. Transportation equipment, also down two of the last three months, had the largest decrease, $4.3 billion or 8.6 percent to $45.3 billion. New orders for manufactured nondurable goods increased slightly to $248.2 billion.
Inventories grew, although at a slower pace than the previous month, indicating further slowing ahead:
Inventories of manufactured durable goods in June, up eighteen consecutive months, increased $1.8 billion or 0.5 percent to $357.8 billion, revised from the previously published 0.4 percent increase. This was at the highest level since the series was first published on a NAICS basis and followed a 1.3 percent May increase. Transportation equipment, also up eighteen consecutive months, had the largest increase, $1.2 billion or 1.1 percent to $109.0 billion. Inventories of manufactured nondurable goods, down two consecutive months, decreased $0.4 billion or 0.2 percent to $236.5 billion. This followed a slight May decrease. Petroleum and coal products, also down two consecutive months, drove the decrease, down $1.0 billion or 1.8 percent to $52.8 billion. By stage of fabrication, June materials and supplies decreased slightly in durable goods and decreased 0.8 percent in nondurable goods. Work in process increased 1.0 percent in durable goods and 0.8 percent in nondurable goods. Finished goods increased 0.5 percent in durable goods and decreased 0.1 percent in nondurable goods.
Reuters was surprisingly unsurprised by the news:
New orders received by factories fell in June, pulled down by weak demand for transportation equipment, government data showed on Wednesday.
The Commerce Department said orders for manufactured goods fell 0.8 percent after a revised 0.6 percent increase in May. Economists had forecast a 0.7 percent decline after a previously reported 0.8 percent rise.
Manufacturing has shouldered the economy’s recovery and the slowdown in factory orders in June further diminished prospects of a strong and swift step-up in growth after a very weak first half.
The new data strongly suggests that the Q2 GDP number was highly optimistic. Commerce will issue its first revision of that number in the final week of this month, and don’t be surprised to see the number go below 1%. The falloff in manufacturing and increase in inventories indicates an economic slowdown from Q1, not increased production.
The July performance from the ISM index shows that Q3 will get off to a worse start than the end of Q2. Unless demand suddenly picks up, we will probably be looking at a negative quarter in either Q3 or perhaps even when Q2 gets its final revision in September. Either way, the US economy is going in the wrong direction, and won’t go in the right direction until investors start getting signals that risk has become better defined and is receding. The only way to accomplish that now is to either loosen a monetary policy that is nearly impossible to loosen further, lower capital-gains tax rates, or start removing regulatory road blocks to expansion and innovation. The Obama administration has refused to do the latter two, which means we can expect stagnation and economic decline through 2012 as well.