Factory orders rise more than expected in September

What happened

September U.S. factory orders rose 1.8% to $677.2B, beating the 1.2% consensus and up from a revised 0.3% prior gain, according to U.S. Census Bureau data released Tuesday. The inventories-to-shipments ratio was 1.46 versus 1.47 in August.

Confirmed

Global impact / market context

Stronger factory orders signal that demand for manufactured goods is holding up, supporting company revenue and production plans. The slightly lower inventories-to-shipments ratio means stockpiles are leaner relative to sales, which can encourage more output and capital spending ahead.

Analyst inference

Factory orders are a backward-looking reading on demand for goods. The upside surprise, combined with a modestly tighter inventory ratio, suggests industrial activity remains firm, which can shape investor expectations for manufacturing profits and for how much companies spend on equipment and capacity.

Analyst inference

What to watch

1. The report gives only a preliminary September factory orders figure and marks the release as developing with updates to come, so the totals may be revised later. Confirmed
2. Census Bureau revisions to prior months could change the pace of growth investors use to judge whether factory demand is accelerating or slowing. Proposed
3. The inventories-to-shipments ratio, which compares stockpiles with sales pace, will show whether leaner inventories push factories to raise production and capital spending. Analyst inference

Evidence

• seekingalpha.com