U.S. Factory Orders Edge Up 0.1% in August as Unfilled Orders Rise

New orders for U.S. manufactured goods edged up 0.1% in August to $663.5 billion, extending July’s increase while showing little change in overall factory demand. The gain amounted to $0.7 billion, according to the U.S. Census Bureau’s latest Manufacturers’ Shipments, Inventories and Orders report.

Other parts of the report pointed to a continued buildup in manufacturers’ order books and inventories. Unfilled orders increased $9.9 billion, or 0.6%, to $1.6096 trillion, while inventories rose $5.1 billion, or 0.5%, to $972.4 billion. Shipments were virtually unchanged at $658.6 billion after rising in each of the prior eight months.

The Census Bureau’s monthly factory report also showed the inventories-to-shipments ratio rising to 1.48 from 1.47 in July. The unfilled-orders-to-shipments ratio increased to 6.87 from 6.81, indicating that the backlog of orders grew faster than shipments during the month.

Durable-goods orders were essentially flat

The modest increase in total factory orders followed a 0.8% rise in July. August’s headline figure reflects both durable and nondurable manufactured goods, with the durable side showing almost no monthly change.

In its advance durable-goods report released September 25, Census said new orders for long-lasting manufactured goods slipped by less than $0.1 billion to $338.6 billion. The change rounded to 0.0%, after a revised 0.9% increase in July. Durable goods typically include products such as machinery, computers, vehicles and other equipment designed to last at least three years.

Transportation equipment was the main drag within durable goods. Orders in that category fell $0.7 billion, or 0.6%, to $114.1 billion. Excluding transportation, durable-goods orders increased 0.3%. Excluding defense, they rose 0.1%. Those figures show that the weakness was concentrated rather than broad across the entire durable-goods sector.

The difference matters because transportation orders can be volatile from month to month, particularly when large aircraft or defense-related bookings move sharply. Looking past transportation, August showed a somewhat firmer underlying order picture than the flat durable-goods headline alone suggests.

Backlogs continued to build

The more noticeable movement in August came from unfilled orders. The $9.9 billion increase lifted the backlog to $1.6096 trillion and marked an increase in 25 of the past 26 months. Unfilled orders represent bookings manufacturers have received but have not yet completed and shipped, making them a useful gauge of work already in the pipeline.

A growing backlog can support future production, but it does not by itself guarantee stronger output. Orders may take months to work through, and manufacturers can face constraints related to capacity, labor, parts availability or customer delivery schedules. Still, the rise in unfilled orders suggests that the amount of booked work awaiting completion continued to expand even though new orders barely moved during August.

The unfilled-orders-to-shipments ratio rose to 6.87 from 6.81 in July. That ratio compares the size of the order backlog with the monthly pace of shipments. Its increase is consistent with the backlog growing faster than manufacturers were clearing orders through shipments during the month.

Shipments themselves were virtually unchanged at $658.6 billion. That broke a run of eight consecutive monthly increases but did not represent a material decline in the dollar value of goods leaving manufacturers. Steady shipments alongside rising unfilled orders left factories with a larger outstanding workload at the end of August.

Inventories rose for an eleventh straight month

Manufacturers also continued adding to inventories. The value of factory inventories increased 0.5% to $972.4 billion, following a 0.4% rise in July. August marked the eleventh consecutive monthly increase, according to Census.

The inventories-to-shipments ratio moved up to 1.48 from 1.47. That means manufacturers held slightly more inventory relative to the current pace of shipments than they did a month earlier. A higher ratio can reflect preparation for expected demand, slower movement of goods through the supply chain, or a mix of both, so the figure is most useful when read alongside orders and shipments rather than on its own.

August’s report therefore presents a mixed but relatively stable picture of U.S. manufacturing demand. New orders increased only slightly, durable-goods orders were essentially flat, and shipments showed little movement. At the same time, unfilled orders and inventories both increased, leaving manufacturers with more booked work and more goods on hand heading into the final month of the third quarter.

The M3 series is intended to provide a broad monthly view of conditions across domestic manufacturing. New orders are useful as an indicator of future production commitments because they capture orders received during the month after cancellations, while shipments show goods already moving out of factories. Reading those measures together with inventories and unfilled orders helps separate current activity from work that may support production in later months.

August did not show a sharp change in the direction of factory demand, but it did widen the gap between incoming work and completed shipments. That makes the backlog and inventory figures more informative than the small 0.1% rise in headline orders on its own.

The next advance durable-goods report, covering September, is scheduled for October 27. Census plans to release the full September Manufacturers’ Shipments, Inventories and Orders report on November 3.