Orders to U.S. factories increased slightly in July, led by increases in demand for automobiles and other transportation products, furniture, household appliances and communications equipment.

The Commerce Department reported Friday that factory orders were up by a bigger-than-expected 0.1 percent. That followed a revised 2.9 percent drop in June, weaker than the government previously estimated. New orders so far this year are 6.8 percent below the same period last year. 

Manufacturers have been hardest hit by the economic slowdown that began last year. To cope with flagging demand, companies have sharply cut production and capital investment and laid off thousands of workers. 

Consumer spending just about flatlined in July, posting only a 0.1 percent increase even as shoppers started receiving the first tax-rebate checks. Private economists and the Bush administration are counting on the tax rebates along with the Federal Reserve's seven interest rate cuts this year to lift economic growth to healthier levels in the third and fourth quarters. 

In the second quarter, the economy grew at a rate of just 0.2 percent, the weakest performance in eight years. Steady spending by consumers in that quarter helped keep the economy out of recession. 

Orders for furniture and related products increased 2.2 percent in July, erasing a 1.1 drop in June. Electrical equipment, appliances and components posted a 1.2 percent increase, led by a 13.3 percent rise in orders for household appliances. 

Transportation products also had an increase in orders of 0.9 percent overall. The biggest gain in the category came from defense aircraft, where orders were up 6.6 percent after a 39.7 percent drop in June. Orders for ships and boats were up 3.3 percent and cars and trucks increased 2 percent. 

Excluding the volatile transportation sector, which tends to swing widely from month to month, factory orders were flat in July after falling 2.7 percent in June. 

Orders for computers and electronic products were down 4.5 percent last month. One of the reasons the Fed has cited for cutting interest rates has been weak investment by businesses in computers and other high-tech equipment. The economic boom was fueled in part by strong capital spending. 

Orders for machinery declined 2.1 percent in July after a 1.6 percent decrease the previous month. Primary metals, the category that includes steel, saw orders fall by 1.5 percent in July.