Washington, DC, Aug. 26--Demand for big-ticket items increased for the second straight month in July, another encouraging sign for the manufacturing sector.
Orders for durable goods, or items meant to last three years or longer, rose 1% to $173.98 billion last month, the Commerce Department reported Tuesday, following a 2.6% gain in June. Economists had expected the gauge to climb 0.9%.
Insight Economics' Steven Wood says the July gain "was the first back-to-back increase in new orders in more than two years." Durable orders fell 1.4% in April and were flat in May.
Most categories showed improvement, except for aircraft and defense-related items.
New orders for automobiles and parts rose 5.5%, the biggest gain since January, following a 3.3% gain in June. Overall transportation orders, however, were down 0.8% after a 5.1% rise in June. That was largely due to an 11.7% drop in civilian-aircraft orders. If transportation orders are excluded, durable-goods orders would have risen by 1.7% for the month.
Capital-goods orders fell 0.5% after a 3.9% gain in June, but they were pulled down by a 12.2% drop in defense-related orders.
Nondefense capital-goods orders rose 1.2%.
The report showed an improvement in business spending.
Orders for nondefense capital goods, which are items meant to last 10 years or more, edged up 0.4%, if orders for aircraft are excluded, after a 2.1% rise in June.
Computer orders climbed 2.4%, while communications-equipment orders soared 11.8%. Machinery orders were up 1.8%.
The manufacturing sector has been among the hardest hit by the 2001 recession. Factories have cut production and workers amid lackluster demand at home and overseas. At the same time, manufacturers have had to compete against a flood of imported goods.
But this and other recent reports on the sector indicate that it is healing.
The Federal Reserve reported earlier this month that production at the nation's factories, mines and utilities in July jumped 0.5%, the biggest increase since January. The Philadelphia Fed reported last week that factory activity in its region improved notably in August and that executives expect growth in the industry over the next six months. That report is widely seen as a precursor to the national report, due out next month.
Durable-goods inventories fell 0.9% in July, after a 0.8% decline in the prior month. Unfilled orders fell by 0.4%. But durable-goods shipments climbed 2.6%, after a 1.7% rise.
