What are Factory Orders?

Factory orders are the dollar value of orders for goods from factories.

How Do Factory Orders Work?

The U.S. Department of Commerce reports the amount of new factory orders every month. The information is divided into four parts: new orders, unfilled orders, shipments and inventories.

The report includes information about durable goods and nondurable goods. Factory order data is often not very surprising, if only because the report of durable goods orders comes out one or two weeks earlier.

Why Do Factory Orders Matter?

Factory orders are an economic indicator. When factory orders increase, the economy is usually expanding as consumers demand more goods and services (which in turn require retailers and suppliers to order more things from factories). Note that increases in factory orders could also mean that inflation is just around the corner. When factory orders decrease, the economy is usually contracting (there is less demand for goods and services and thus less need to reorder supplies).