New orders for costly U.S. manufactured goods rose in July, led by the strongest demand for cars since January and solid gains in other sectors, the government said Tuesday.

Orders for durable goods (search) -- big-ticket items like refrigerators that are designed to last three years or more -- climbed 1.0 percent in July after a rise of 2.6 percent the previous month. The report was broadly in line with analysts' expectations for a 0.9 percent increase.

"Overall it's a healthy report, and I think it continues the very upbeat picture that has been painted now for a couple of months, that manufacturing is finally coming out of its slump," said Mike Niemira, senior economist, Bank of Tokyo-Mitsubishi (search).

Demand for motor vehicles and parts surged 5.5 percent. Aided by record high incentives and low interest rates, July auto sales are expected to be the best month of the year, U.S. automakers such as General Motors Corp. (GM) have said.

Machinery orders also had a strong showing, climbing 1.8 percent, while orders for computers and electronic products rose 1.9 percent.

Excluding transportation, orders rose 1.7 percent and excluding spending on defense, orders were up 1.4 percent.

Orders of non-defense aircraft and parts sank 11.7 percent after soaring 37.6 percent in June.

Stocks and the dollar showed little reaction to the report, bond prices fell slightly.

Inventories of durable goods fell 0.9 percent, the twenty-ninth fall in the last 30 months, in a sign manufacturers will have to boost production to keep up with demand.

Shipments of manufactured goods rose 2.6 percent.

Recent national and regional manufacturing surveys have suggested the beleaguered manufacturing sector has been returning to health.

The Institute for Supply Management (search) manufacturing index rose for a third straight month in July. At 51.8, the index was above the 50 level that separates contraction from expansion for the first time since February.