Factory orders rise less than expected in July

WASHINGTON - September 2, 2009 Still, orders rose for the fifth time in six months, a sign that the manufacturing sector is continuing to recover from a steep downturn.

The Commerce Department said Wednesday that factory orders rose 1.3 percent in July, after the June increase was revised upward to 0.9 percent. The July bump was still below analysts' expectations of a 2.2 percent increase, according to a survey by Thomson Reuters.

An 18.5 percent jump in transportation goods orders drove the overall increase. Orders for commercial aircraft and parts doubled after that volatile category fell 30 percent in June.

Orders for big-ticket items expected to last at least three years, known as durable goods, rose 5.1 percent in July, the most in two years. That's also slightly above the department's earlier estimate of a 4.9 percent rise.

Shipments of new autos grew 5.1 percent, as sales jumped due to the government's Cash for Clunkers program.

But orders for nondurable goods, such as food, petroleum products and chemicals, fell 1.9 percent, the most since December. That followed a 2.8 percent increase in June, when oil prices rose. But oil prices fell 10.2 percent in July by one measure, according to economists at JPMorgan Chase & Co., reducing the value of petroleum and coal products orders by 7.2 percent.

A key gauge of business investment, known as orders for non-defense capital goods excluding aircraft, fell 0.3 percent, the same as previously reported.

The report follows a positive reading about manufacturing activity issued Tuesday. The sector grew in August for the first time in 19 months, according to a private survey of purchasing managers.

The Institute for Supply Management said its manufacturing index rose to 52.9 in August, up from 48.9 the previous month. That was its first reading above 50, which indicates expansion, since January 2008.

Auto production improved last month as General Motors and Chrysler reopened many plants that were shut in May and June while the companies restructured and emerged from bankruptcy protection.

The industry received a major boost from the clunkers programs, which provided rebates of up to $4,500 for consumers that traded in old cars for new models. U.S. sales of cars and light trucks rose to 1.3 million in August, a roughly 30 percent increase from July and the first monthly year-over-year gain since October 2007.

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