Consumers are shifting their spending towards services. JThe property spending boom is over, and it will eventually show up in crafting.
By Wolf Richter for WOLF STREET.
U.S. manufacturing, as measured by new orders received, rose further in May, with runaway inflation being part of the equation, but not all of it, and unfilled orders rising further, and the key stock-to-shipment inventory – which eliminates the effects of inflation – maintained at its lowest level since August 2019.
The impact of rate hikes or any slowdown is not yet visible in the May manufacturing data. But executive surveys conducted in June and released last week as manufacturing PMIs point to an initial drop in orders in June from May quite sharply.
New orders for manufactured goods in May rose 1.6% from April, seasonally adjusted, to $543 billion, according to Census Bureau data today: Manufactured Durable Goods Orders + 0.8% to $267 billion; non-durable manufactured goods orders +2.3% to $276 billion.
On an annual basis, new orders for manufactured goods jumped 14% in May, following a series of massive year-on-year increases over the past two years, with orders for manufactured durable goods rising by 12.2%, and for non-durable manufactured goods 18.9%.
Manufacture of durable goods.
Transportation equipment is the largest category of durable goods, with $82.8 billion in May orders, unadjusted for seasonality, up 19.7% from a year ago. The vast majority of this sector is made up of automobiles and trucks, heavy trucks, buses, components and trailers, which account for almost 70% of the sector. Aircraft (non-defense and defense combined) represent 18% of total transport orders. Ships and boats represent 3% of transport orders.
|Main categories of durable goods, not seasonally adjusted||billion $ in May
||% change over year|
|Transportation equipment (automobiles, heavy trucks, components, trailers, aircraft, ships and boats)||82.8||19.7%|
|Fabricated metal products||38.6||9.8%|
|Computers and electronic products||22.2||4.8%|
|Electrical equipment, household appliances, components||13.4||7.1%|
Unexecuted commands rose to $1.11 trillion in May, up 7.3% from a year ago. All of this year-over-year increase is likely due to price increases:
Inventory Levels in dollars are inflated by cost increases and do not indicate whether or not inventory is piling up – the “inventory glut” rumor. But the inventory-to-shipments ratio eliminates the factor of prices and price increases, and in May the ratio was unchanged from April at 1.47, the lowest since August 2019, according to the Census Bureau:
The impact of rate hikes or any slowdown in demand is not yet visible in the May manufacturing data.
But there are the manufacturing executive surveys for June: although the overall ISM manufacturing PMI for June was in growth mode, the new orders index within it fell to 49.2, compared to May’s fairly strong reading (55.1), with 50 being the split. line between the rise and fall in orders from one month to the next.
Spending is shifting from goods to services. For months now, consumers have gone from the mind-boggling boom in pandemic-related spending on goods to spending on services. Spending on discretionary services has crashed during the pandemic, and it’s coming back, even as spending on goods has fallen. Consumer spending on services represents more than 60% of total consumer spending. And that change is huge – even adjusted for inflation. Read… Consumer spending returns to services from Stimulus-Binge on Goods. Inflation eats away at income
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