Key Takeaways:
- Orders of durable goods rose by 1.8% to $263 billion, while shipments fell 0.5% to $256 billion to widen the gap;
- Shortages of materials and labor continue to impede shipments;
- Nearly 900,000 of the current 10.9 million job openings are within the manufacturing sector, creating strong competition for a dearth of employees.
By Manuel Gutierrez, Consulting Economist to NKBA
The U.S. manufacturing industry remains saddled with the inability to ship as much product as it would like, to meet ongoing demand. In August, new orders for DurableGoods rose 1.8% to $263 billion, but shipments actually declined by 0.5%, widening the gap between orders and shipments.
This gap results in an increased backlog, ensuring that, under different circumstances, businesses would be able to keep their factories operating at full capacity. This isn’t possible today, however, since these businesses are facing heavy headwinds in the form of well-documented shortages of materials and labor.
The gap between orders and shipments of durable goods grew in August, as shortages in materials and labor wreaked havoc on the ability to ship.
Materials shortages have been caused by the temporary shutdown of many businesses last year, which disrupted the supply chain. The most visible has been the shortage of automobiles due to the lack of microchip processors.
Compounding this issue is the severe labor shortage faced by virtually all types of businesses.
There are currently 10.9 million job openings in the U.S. Of these, 889,000, or 8%, are in the manufacturing sector. The competition for these workers is fierce, and employers, including manufacturers, are being forced to increase wages and benefits and often offer signing bonuses to attract employees.
Data on the production of specific durable goods is available for only six different product categories, illustrated in Figure 2.
Two lines are shown for each category, with new orders in red, shipments in purple.
While orders for all durable goods combined rose 1.8%, two categories showed orders falling. New orders for Machinery, the second largest durable-goods category, fell 1.2% in August to $38.1 billion.
Primary Metals orders also declined in August, by 1.5% to $24.1 billion. This was the only category that saw both orders and shipments fall for the month.
New orders for Transportation Equipment, the largest category tracked, accounting for 31% of durable goods, rose 5.5% in August, but shipments fell by 2.7%. New orders for “vehicles and parts,” the largest component of the transportation sector, fell by 3.1% in August. The defense industry saw new orders for “aircraft and parts” drop by a significant 18%.
These declines were offset by a substantial 78% jump in orders for “nondefense” aircraft, which reached $16.3 billion in August.
Finally, note the large gap between orders and shipments in the Computers graph (bottom left, Figure 2). This is because several subcategories within Computers are not included in the new orders totals, but are in shipments. Examples are communications equipment and measuring instruments.
Charts:
