Factory Check

U.S. factory orders rise for 2nd straight month

Thus far, things are looking up for U.S. factories in 2017. New orders for U.S.-made goods increased for a second straight month in January, suggesting the recovery of the manufacturing sector was gaining momentum as rising prices for commodities spur demand for machinery.

Factory goods orders rose 1.2 percent, the Commerce Department said on Monday, March 6, after an unrevised 1.3 percent jump in December. Economists polled by Reuters had forecast factory orders advancing 1.0 percent in January. Through a wider prism, factory orders were up 5.5 percent from a year ago…and a survey last week showed that national factory activity had jumped to its two-and-a-half year peak in February.

Blue columns represent the percentage increase in U.S. factory orders by each month. Beige columns represent monthly percentage decreases. —United States Census Bureau image

Total shipments of manufactured goods increased 0.2 percent in January. This comes after a 2.5 percent surge in December, plausibly kickstarted by the new administration. Manufacturing, which accounts for about 12 percent of the U.S. economy, appears to be regaining its footing after being buffeted by lower oil prices, a strong dollar and an inventory overhang.

This could be a case of ‘keeping up appearances’; these statistics could be a symptom of windfall from a new administration taking office and subsequent market optimism. We still see U.S. factory closings regularly, and it remains difficult to predict what will come from Washington each week.

That being said, the hard data isn’t empty of meaning. The manufacturing spike over the last two and a half years is certainly a positive for a sector that has struggled mightily to combat offshoring and layoffs, and the two month run of rising orders does show factory output is increasing. It’s certainly something to keep an eye on, especially on a month-to-month basis.

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