The Factory Orders report is an economic indicator that measures the overall volume of new orders received by manufacturers for both durable and non-durable goods.
It provides insights into the health of the manufacturing sector, business investment, and future production levels, making it a valuable tool for policymakers, traders, and analysts in evaluating the strength of the economy.
What is the Factory Orders report?
Factory orders encompass all new orders placed with manufacturers, including those for consumer goods, capital goods, and defense-related items.
The report typically excludes orders for services and is divided into two main categories:
- Durable Goods: These are items with a useful life of more than three years, such as automobiles, machinery, and computers.
- Non-Durable Goods: These are items with a shorter useful life, such as food, clothing, and petroleum products.
The Factory Orders report is closely related to the Durable Goods Orders report, which is released a week earlier and focuses exclusively on durable goods orders.
The Factory Orders report expands upon this data by incorporating non-durable goods orders.
How to read the Factory Orders report
The Factory Orders report is usually presented as a percentage change from the previous month or year.
Positive figures indicate an increase in new orders, while negative figures signify a decrease.
The report may also include data on shipments, unfilled orders, and inventories, which can provide further insights into the state of the manufacturing sector.
When analyzing the report, it is essential to consider factors such as seasonal variations and the impact of large, one-time orders (e.g., aircraft orders) that can cause significant fluctuations in the data.
Analysts often look at the “core” factory orders figure, which excludes volatile items like transportation equipment, to get a clearer picture of underlying trends.
Why is the Factory Orders report important?
The Factory Orders report is important for several reasons:
- Economic Health: An increase in factory orders signifies growing demand for goods, indicating a healthy and expanding economy. Conversely, a decline in orders may signal economic weakness or contraction.
- Business Investment: Factory orders data can provide insights into business investment trends, as businesses typically invest in capital goods when they expect future demand to rise.
- Future Production: Since factory orders represent the pipeline of future production, the report can help predict future output levels and potential changes in employment within the manufacturing sector.
Who publishes the Factory Orders report?
The Factory Orders report is published by the U.S. Census Bureau, which is part of the Department of Commerce.
The Census Bureau collects data from the Manufacturers’ Shipments, Inventories, and Orders (M3) survey, which covers thousands of manufacturing companies across the country.
When is the Factory Orders report released?
The Factory Orders report is released monthly, usually within the first week of the month following the reporting period.
The data is available on the United States Census Bureau’s website and through various financial news outlets and data providers.