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Answer:
Dear
Marvin,
The
news is accurate -- at least in this case. Factory
orders (also known as productivity in economic jargon)
have been going up. In fact, third quarter productivity
rose by the largest amount in two years.
The
numbers
According
to the Commerce Department, orders for manufactured
goods rose by 2.2% in October. That rise was definitely
a positive because it followed on the heels of a 1.4%
decline in September. Economists are now saying that
the decline was largely due to the disruption in orders
caused by two things: the hurricanes and a strike
at Boeing.
Non-farm
business production was up 4.7% in the third quarter
-- the highest it's been in two years.
Demand
for durable goods -- those that last three years or
longer -- was up 3.7% in October. Factory orders for
aircraft were also up, while demand for cars and computers
were either flat or fell.
Bottom
line: The inventories-to-shipment ratio, which
measures how long it will take to deplete inventories
at the current sales pace, came in at 1.17 months.
What
these numbers mean for you
Lean
inventories obviously mean that manufacturers will
have to step up production to meet the demand.
Rising
factory orders are a plus for anyone who is currently
working in the manufacturing industry or who has recently
been laid off -- those who fall into the latter category
could be rehired.
The
numbers also indicate it may be the right time to
consider investing in companies that make plant equipment
-- provided those companies are profitable and well
run. The higher the factory production figures, the
more likely it is that plant and equipment shortages
will develop. That in turn means increased need for
machine tools, industrial equipment and capital goods.
The
good news has already translated into a book in prices
for some stocks and for U.S. Treasuries.
But
please remember our ongoing advice -- don't put all
your stocks in one basket. Remain diversified.
Good
luck!
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