New orders for manufactured goods in September, the most recent figures available at press time, decreased $19.3 billion or 5.8 percent to $311.1 billion, according to the Department of Commerce. This follows a 0.1 percent August decrease and is the lowest level since March 1997. Shipments decreased $14.3 billion or 4.2 percent to $323.1 billion, following a 0.3 percent August decrease. This is the lowest level since August 1998.
Year to date, shipments for 2001 are 4.6 percent below the same period a year ago; shipments for the third quarter are 2.4 percent below the second quarter. Unfilled orders, down nine consecutive months, decreased $10 billion or 1.8 percent to $553.2 billion, following a 0.9 percent August decrease. The unfilled orders-to-shipments ratio was 4.36, up from 4.26 in August. Inventories, down eight consecutive months, decreased $4 billion or 0.9 percent to $460.9 billion, following a 0.7 percent August decrease. The inventories-to-shipments ratio was 1.43, up from 1.38 in August.
New orders
New orders for manufactured durable goods in September, down four consecutive months, decreased $15.4 billion or 8.5 percent to $165.2 billion, unrevised from the previously published 8.5 percent decrease. New orders for nondurable goods decreased $3.9 billion or 2.6 percent to $148 billion.
Although several manufacturing indicators in the Cleveland District of the Federal Reserve Bank continued to decline in October and early November, some improvement in new orders in the northern part of the district and a slowdown in the decline in new orders in the southern part of the district suggest that industry conditions may improve during the first quarter of 2002 for Northeast Ohio. Most manufacturing contacts reported that employees were working shorter weeks with no overtime.
Contacts in the steel industry noted that prices stabilized in October and November, but did so at very low levels. Most companies reported selling steel at or below cost, and contacts noted that companies operating under bankruptcy protection are pricing their products artificially low to keep their contracts, contributing to the downward price pressures in the industry.
Steelmakers that produce niche products reported for the first time that business was sluggish, but noted that they do not expect this weakness to persist.
The National Association of Purchasing Management’s index of business activity fell from 47 to 39.8 in September. A figure below 50 shows contraction. Analysts had been expecting a reading of 44.5. The index is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. Of the 20 industries tracked, none reported growth.
Personal computer sales were also running below what they were a year ago through August, according to the economic site, Dismal.com. The replacement of IT and other equipment lost in the WTC attacks will generate a moderate boost in this demand level, but this increase may be swamped by the national slowdown in business spending.
Shipments
Shipments of durable goods in September, down four consecutive months, decreased $10.4 billion or 5.6 percent to $175.1 billion, revised from the previously published 5.5 percent decrease. Shipments of nondurable goods decreased $3.9 billion or 2.6 percent to $148 billion.
Unfilled orders
Unfilled orders for durable goods in September, down nine consecutive months, decreased $10 billion or 1.8 percent to $553.2 billion, unrevised from the previously published 1.8 percent decrease.
Inventories
Inventories of durable goods in September, down eight consecutive months, decreased $3.1 billion or 1.1 percent to $292.3 billion. Inventories of nondurable goods, down eight consecutive months, decreased $0.9 billion or 0.5 percent to $168.6 billion.
By state of fabrication, September finished goods decreased 1.9 percent in durables and 0.4 percent in nondurables. Work in process increased slightly in durables and decreased 0.3 percent in nondurables. Materials and supplies decreased 1.5 percent in durables and 0.8 percent in nondurables.
Capacity utilization fell to 75.5 percent in September. Capacity utilization is now at its lowest level since 1983. This low capacity utilization rate is eliminating supply bottlenecks and thus rapidly reducing inflationary pressure.
Production of primary metals, textiles, industrial and electrical equipment and motor vehicles were all down by more than 10 percent over the same period last year. Combined these industries account for one quarter of U.S. production. Significant improvement in domestic and/or foreign demand for manufactured goods will be necessary before the severe recession in manufacturing will end.
The production of business equipment dropped 2.3 percent in September; for the third quarter as a whole, it tumbled 13.4 percent at an annual rate, its largest quarterly decline since the fourth quarter of 1982.
