Durable goods data for August showed new orders for manufactured durable goods increased 1.8% to $263.5 billion. The rise in orders comes after 0.5% growth in July as orders have now risen fifteen of the last sixteen months. Apart from the headline data, there are some interesting trends going on with manufactured durable goods.
Non-defense Aircraft New Orders Skyrocket
New orders for nondefense aircraft and parts jumped a staggering 77.9% in August, accounting for much of the 5.5% increase in transportation equipment orders. Interestingly, the rise in nondefense aircraft did not expand to defensive aircraft orders as that industry saw a 17.8% decrease in new orders.
Expanding the effect of nondefense aircraft’s jump to the overall data, total durable goods new orders excluding transportation only rose 0.2%. Far lower than the 1.8% overall number. Simply taking out nondefense aircraft orders would result in the total new orders for August likely staying flat, maybe even being lower for the month.
Backlog Grows Despite Inventories Building
Apart from new orders data, unfilled orders and total inventories both rose in August by 1.0% and 0.8% respectively. This continues the trend of both unfilled orders and total inventories building over recent months as inventories have increased at least 0.8% each of the last three months while unfilled orders have risen at least 0.5% each month in that time frame.
This seems at first glance counterintuitive as companies should theoretically want to fulfill all orders with any inventory they have as opposed to stock products they could otherwise sell to consumers. This seems likely to be due to much-publicized shipping and other logistical issues as goods are having trouble making their way to end users due to wide-ranging issues in the transportation and logistics industries.
Computer Products
An example of inventories and unfilled orders both rising is in the computer and electronic products industry. Unfilled orders have risen around 0.5% the last three months with a 0.6% increase in August. Meanwhile, total inventories stayed flat in August but rose 0.1% in July and 0.7% in June.
No change in inventories would suggest that goods are selling as fast as producers can make them, however, the backlog still continues to rise. The global chip shortage is still in effect as semiconductor producers are still attempting to reach demand. The steady build in orders is likely due to both a growing backlog of demand and people placing multiple orders for the same goods to try to get them from somewhere. In many cases, the orders for "extra" goods may be canceled down the road.
