Until Joe Biden started selling “Recovery Summer,” manufacturing had been one of the few areas in which Americans could take hope that the recession had truly ended. August’s numbers, released a few minutes ago by the Census Bureau, continued the bad news that started in late spring with a sharp downturn in demand. New orders and shipping both dropped significantly in August, making it the third month of declines in four months:
New orders for manufactured goods in August, down three of the last four months, decreased $2.2 billion or 0.5 percent to $408.9 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent July increase. Excluding transportation, new orders increased 0.9 percent. Shipments, also down three of the last four months, decreased $2.5 billion or 0.6 percent to $415.1 billion. This followed a 1.2 percent July increase. Unfilled orders, down following four consecutive monthly increases, decreased $0.1 billion to $804.0 billion. This followed a slight July increase. The unfilled orders-to-shipments ratio was 5.59, up from 5.53 in July. Inventories, up seven of the last eight months, increased $0.7 billion or 0.1 percent to $526.4 billion. This followed a 0.9 percent July increase. The inventories-to-shipments ratio was 1.27, up from 1.26 in July.
This follows a bad report on durable goods from ten days ago. This covers all of the manufacturing sector, of which durable goods is a significant part, so this shouldn’t come as a total surprise to anyone.
The outlook doesn’t look bright, either. Inventories rose again, this time up 0.4%, which will tend to depress new orders in coming months. It will also force retailers to discount merchandise more heavily, eroding profits and limiting job creation, although for consumers with cash, it’s good for bargain hunting. The backlog shrunk again as unfilled orders dropped slightly. On the plus side, shipments of non-durable goods rose in August.
For some other mildly good news, the housing market stabilized a little in August:
Pending sales of previously owned U.S. homes rose more than expected in August to a four-month high, indicating the housing market was regaining some stability after recent steep declines.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in August, increased 4.3 percent to 82.3 from July.
It was the second straight month of gains in the index, which leads existing home sales by a month or two. July contracts were revised down to show a 4.5 percent increase instead of the previously reported 5.2 percent rise.
Bear in mind that these sales dropped by double-digit percentages over the summer. This is a bounce back from the bottom, but that doesn’t make this bad news. We may, after having finally rid ourselves of gimmicky government interventions, finally reached a rational level of sales and valuation. When more sales data gets released, we’ll know whether homeowners can finally breathe easier.