uploads///New Orders

New factory orders continue to fall

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Dec. 12 2014, Updated 4:00 p.m. ET

Factory orders

New orders to U.S. factories fell by 0.7% in October after a revised 0.5% fall in September. A fall was registered for the third successive month as new orders fell by a staggering 10% in August. After the decrease, new orders for October stood at $496.6 billion.

The factory orders report is officially known as the Manufacturers’ Shipments, Inventories, and Orders Report. It is meant to portray the health of the U.S. manufacturing sector and includes durable as well as nondurable items.

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Investor impact

A positive report signifies a healthy manufacturing sector, which is good news for broad market equity exchange-traded funds (or ETFs) such as Standard & Poors depositary receipt (or SPDR) S&P 500 ETF (SPY), SPDR Dow Jones Industrial Average ETF (DIA), and the iShares Core S&P 500 ETF (IVV).

Transportation-focused ETFs such as iShares Dow Jones Transportation Average Index Fund (IYT) and industrial-focused ETFs such as SPDR Industrial Select Sector Fund (XLI) also look to this report. This is because the transportation category is considered volatile, and an increase or decrease in new orders in this category can cause a favorable or adverse movement in prices.

Details of report

Shipments of manufactured goods fell by 0.8% to $499.2 billion in October after registering a 0.1% rise a month prior.

Unfilled orders rose by 0.4%, to $1,174.2 billion, the highest level since the series was first published in 1992. An important point to note is that unfilled orders have risen in 18 of the last 19 months.

The transportation category is considered volatile due to new orders that spiked by 10.5% in July and then slumped by 10% in August. Excluding transportation, new orders fell by 1.4% in October.

This signifies that transportation equipment actually helped cushion a fall in overall orders placed. Orders for transportation equipment rose in October after falling for two previous successive months. They increased 3.4% over the month, to $76.5 billion.

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