Consider a hypothetical investment claim: stronger national factory bookings mean a manufacturer has a larger pipeline supporting earnings growth. The March 6, 2017 Census release supplies a reason to test that claim, not accept it. January new orders rose 1.2 percent to $470.2 billion, but the durable-goods backlog fell 0.4 percent to $1,114.1 billion. No particular company is making the hypothetical claim here. [jan17prel]

Our proposed test starts with the company's own evidence: the composition and quality of its backlog, expected fulfillment timing, cancellation terms and actual cancellation records. Which orders genuinely support the proposed earnings outlook? Census measures new orders net of cancellations, but the aggregate backlog decline does not establish that cancellations caused it. Neither does that decline refute an individual firm's earnings thesis. [jan17prel]

The preceding release adds a second diligence check: identify the estimate available when an argument was made. On February 3, Census reported December shipment growth of 2.2 percent. On March 6, it revised that growth to 2.5 percent. Those are two vintages of one Census series, not independent corroboration. A thesis using the earlier shipment level needs a dated baseline, not an unnoticed substitution. [jan17prel][dec16prel]

The national figures are seasonally adjusted nominal dollars, not inflation-adjusted growth. New and unfilled orders exclude semiconductors; the backlog is a durable-goods month-end stock. The nonprobability survey cannot supply sampling confidence intervals. These boundaries leave the investment proposition unproven here. Firm-specific backlog quality and cancellation evidence would be necessary additional inputs to test it, not a promise of earnings or a recommendation to buy. [jan17prel]

Source documents

  1. Manufacturers Shipments, Inventories and Orders, January 2017https://www.census.gov/manufacturing/m3/historical_data/pressreleases/prel/2017/jan17prel.pdf
  2. Manufacturers Shipments, Inventories and Orders, December 2016https://www.census.gov/manufacturing/m3/historical_data/pressreleases/prel/2016/dec16prel.pdf