Situation

On a monthly basis : New orders increased by 1.0 % in Feb’07 ( - 5.7 % decline in Jan’07)

On a yearly basis : New orders decreased by - 0.82% p.a in Feb’07 ( -1.648 % -revised data- decline in Jan’07)

 

Background

 

  • Shipments, down two consecutive months, again decreased by - 0.5%. ( -1.7 % decrease in Jan’07)
  • Unfilled orders, up twenty-one of the last twenty-two months, increased  0.9 % percent to $702.7 billion. This was at the highest level since the series was first stated in 1992 and followed a 0.3 % Jan’07 increase.
  • The unfilled orders-to-shipments ratio was 4.85 in Feb’07, up from 4.82 in Jan’07.
  • Inventories, up eleven of the last twelve months, increased $0.1 billion to $483.0 billion. This followed a slight January decrease. The inventories-to-shipments ratio was 1.25, up from 1.24 in January.

     

    Conclusion ( click on image for a larger visual)

    • The background details all point to lowerered New orders growth / possibly more declines  coming in the next few months
    • With shipments being down and inventories piling up - we cannot expect much growth in new orders until inventories start diminishing ( looks unlikely in the immediate future)

     

    • New orders look like ranging initially down towards -3.00% p.a with an upside possibility of 2.5% growth for the next 2-4 months. Post this declines towards - 6.0% p.a towards mid 2008.
    • The recent slow growth / decline in orders has immediate repurcursions to Production growth.
    • The longer term implications of reduced growth / declines in growth in Orders (compunded by problems of high inventory) has longer term implications in terms of declines in Production and GDP growth towards mid 2008. 

     

     

    Related links : 

    1. New Orders Index for January’07 contracts
    2. Production grows by 3.4 % p.a in Feb’07 (2.7 % p.a in Jan’07)
    3. GDP increased at a rate of 3.07% p.a in Q4 2006 (as compared to 2.96% in Q3 2006)

     

     

     

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