Understanding the Importance of Factory Orders Report

PAMM Investments Forex Writing

The performance of the economy has a significant role in determining the market condition. That’s why investors pay high attention to such indicators that influence the performance of investment markets. One of the important tool investors would like to see is the Factory Orders Report. This is an economic indicator which is used to measure the dollar level of new factory orders. The orders include both durable and non-durable goods. The report is published on monthly basis, by the Census Bureau of the U.S. Department of Commerce and it’s released about one or couple weeks after the durable goods orders report. It has a more comprehensive and detailed information than the durable goods orders report.

The Factory Orders Report gives picture of how busy the manufacturing sector will be in the next few months, in order to provide consumers’ orders. The report includes four components, which is also commonly called by “The Manufacturers’ Shipments, Inventories and Orders”:

1. New Orders

This component indicates whether orders are growing or slowing

2. Unfilled Orders

It indicates an excess in production

3. Shipments

This indicates the present sales

4. Inventories

This last component indicates the strength of the existing and upcoming production

Investors are closely watching economic indicators, including the factory orders report due to the large effect of those kinds of report to the investment markets. When it’s used in conjuction with other indicators which monitor manufacturing and production, the equity market will be positively influenced by the increase in production.

When the report shows the increase in production number, it indicates an increase in market demand. Thus, it should be taken as a positive (bullish) trend to the national currency. It applies vice versa when the production number is declining.

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