U.S. Factory Orders Fall For Third Straight Month

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4. Depends on production environment

Backlog is relevant to ETO/MTO (Engineer or make to order) companies like shipbuilding, civil engineering, custom machining etc. They can have backlogs of months of work that need a stream of new orders to keep the "funnel" full, while still taking long lead times to complete backlog orders. Consumer goods tend to be MTS or make to stock in supply, and ship either from inventory or with very short assembly times (think Dell). Since this is an aggregate report that at least at this summary level does not distinguish by environment, companies will answer based on what they use, either backlog or inventory. Backlogs up and new orders down would normally indicate a throughput slowdown at an individual level, but at the aggregate level there really is no clear reason as companies fulfill, and report, orders in many different ways. It could be order cycle, slowdown (although jobs report would comflict here) or simply an industry distribution where long term ETO/MTO companies are seeing growing orders for capital equipment etc (a global market) but ATO/MTS consumer goods companies are seeing lower orders to ship from inventories; hence both backlog and inventories increase.