America's factories saw orders grow stronger in June, a spot of good news for manufacturers and for the economic recovery.

The Commerce Department (search) reported Wednesday that orders placed with U.S. factories rose by a solid 0.7 percent in June from the previous month. The performance exceeded economists' expectations for a 0.5 percent advance.

The increase, the largest since March, was up from a 0.4 percent rise in May.

Orders for "durable" goods, costly manufactured items expected to last at least three years, posted a 0.9 percent increase in June, a turnaround from the 0.9 percent drop the month before.

Demand for machinery, fabricated metal products, airplanes for the military and electrical equipment were among the categories of durable goods showing gains in June.

For nondurable goods, such as food, orders rose by 0.5 percent in June, following a strong 2 percent increase in May. Meat, poultry and seafood products, chemicals, and plastics and rubber goods were among the categories posting increases in orders for June.

There were spots of weakness in the report. Orders for cars, computers and household appliances were among the categories showing declines.

The Federal Reserve (search) meets next week and many economists are predicting policy-makers will boost short-term interest rates by one-quarter percentage point, which would mark the second rate increase this year. The Fed on June 30 pushed up a key rate to 1.25 percent, from a 46-year low of 1 percent. It marked the first rate rise in four years and was aimed at making sure that inflation doesn't become a problem for the economy, which is on a solid recovery path despite hitting some potholes in June.

Other economic reports — including the nation's employment situation, retail sales and industrial production — indicated that the economy cooled a bit in June.

Federal Reserve Chairman Alan Greenspan, appearing on Capitol Hill last month, acknowledged as much but predicted that economic activity would pick up in the months ahead. Early indicators for July, including automobile sales, seem promising on that score.

The nation's manufacturing sector was hardest hit by the 2001 recession and has struggled mightily to get back on firm footing since then. Although the recovery road has been bumpy for manufacturers, economists predict factory activity will improve.

But it's far from clear how that will translate into a sustained rebound in manufacturing jobs. Factories lost 11,000 jobs in June, disappointing news after logging an increase of 75,000 jobs in the previous four months.

The government on Friday will release a report on the nation's employment situation for July. Economists are hopeful that payrolls will grow by around 200,000, which would mark an improvement from the lackluster 112,000 net positions added in June.