11) Economic Indicators: Factory Orders Report

by · October 16, 2010

What It Is

Factory Orders Report is also known for its very long name: Manufacturers’ Shipment, Inventories, and Orders Report. It gives you a comprehensive overview of what’s going on in the manufacturing industry. It is useful to economists as the data in the report is used to determine the overall gross domestic product, or GDP, of a country as well as the levels of economic output for a numerous industries in the coming months or years. The Factory Orders Report is released by the U.S. Census Bureau every first week of the month.

Basic Information

Unlike other kinds of reports you may encounter, this one has a mixture of both old and new information. Therefore you have to be focused when reading it to know the difference.

A number of its data have been derived from a sub-report called Durable Goods Report. This is released a week before the Factory Orders Report. Durable goods include computers, cars, and turbines. Factory Orders are much broader, covering other non-durable goods industries such as food and apparel. Also, it can provide a breakdown of these pieces of computer equipment, from semiconductors to motherboards.

Since the report is related to the manufacturing industry, the information you are going to get will be related to the shipments, inventories, orders unfulfilled, and the overall health of the industry during the survey month.

The report will provide you with statistics presented in terms of changes between the previous year or month. The monetary values are better expressed in current dollars. However, because of the current values, two important factors that can have a huge effect on the value of the inventory, namely, price of the goods and the inflation rates, are not taken into consideration.

How the Report Is Valuable

The Factory Orders Report provides an excellent overview of the manufacturing industry. If you know how to interpret the information and use it to your advantage you may just be able to discover new businesses and better methods of handling inventory levels to improve income or obtain future earnings. With the early release of the Durable Goods Report, Factory Orders can be more comprehensive and can display separate figures.

Things to Watch Out For

Since it’s closely related to the Durable Goods, data can be redundant. Moreover, the missing factors in determining inventory levels, such as price and inflation rate can make it difficult to make excellent comparisons. Some of the information will also turn out to be outdated.

You can use the report when you need to have a good idea about the GDP and, in turn, use the figure to develop future income statements. You cannot depend on it to further markets.

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