New factory orders decreased in December 2014
Treasury yields skyrocket as US job market metrics improve (Part 9 of 13)
New factory orders
The new factory orders report is officially known as the “Manufacturers’ Shipments, Inventories, and Orders Report.” It’s meant to portray the US manufacturing sector’s health. It includes durable and non-durable items.
New orders to US factories tumbled by 3.4% in December 2014. They fell at a downwardly revised 1.7% pace in November. After the decrease, new orders for December were $471.5 billion. The decline in new factory orders in December made it the fifth successive monthly fall. It confirmed the fall reported in the advance report released for December.
Investor impact
A negative report signifies a slowing manufacturing sector. This is bad news for broad market equity ETFs—like the SPDR S&P 500 ETF (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the iShares Core S&P 500 ETF (IVV).
Transportation-focused ETFs—like the iShares Dow Jones Transportation Average Index Fund (IYT)—and the Industrial ETFs—like the SPDR Industrial Select Sector Fund (XLI)—also watch the report. The transportation category is considered volatile. An increase or decrease in new orders in this category can cause a favorable or adverse movement in prices.
Report details
Shipments of manufactured goods fell by 1.1% to $488.2 billion in December. They registered a 1% decrease in November. Shipments fell in four of the last five months.
Unfilled orders fell by 0.8% to $1,166.9 billion. They increased 0.2% in November. These orders fell for the first time in 11 months.
Excluding transportation, new orders fell by 2.3% in December. Since new factory orders fell less sharply—excluding the transportation category—it signifies that a fall in this category had a large influence on new orders. Orders for transportation equipment tanked 9.1% in December. They fell by 4% in November. Orders fell primarily because of a 55.5% decline in orders for nondefense aircraft and parts and a 13.8% decline in defense aircraft and parts.
Among other notable decreases were the orders for computers. They fell 31.1% in December. They rose by 1.2% in November.
In the remaining parts of this series, we’ll analyze the primary market activity in US Treasuries last week.
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