August Durable Goods Orders Beat Expectations

New orders for big-ticket manufactured products rose in August at the fastest pace in three months, providing a reassuring sign that American factories are not headed for another slump.

The Commerce Department (search) said that orders for durable goods (search), items expected to last at least three years, jumped 3.3 percent after falling by 5.3 percent in July. Analysts had been expecting a rebound but the rise was far better than the 0.8 percent advance they had forecast.

The big drop in July had raised concerns that the manufacturing sector, the hardest hit sector in the 2001 recession, could be in danger of falling into another slump.

But analysts took heart not only from the size of the rebound but also the fact that it covered a number of key categories.

"The really good news is that the strength is broad-based, with hefty gains in metals, computers, electricals, machinery and aircraft," said Ian Shepherdson, chief U.S. economist for High Frequency Economics, a consulting firm in Valhalla, N.Y.

The August report on durable goods orders showed that the overall gain included a 1.4 percent increase in demand for motor vehicles and airplanes. But even excluding this increase, demand for manufactured goods was strong, rising by 4.2 percent, the biggest increase excluding transportation in 17 months.

Orders for motor vehicles and parts rose by 0.8 percent after a 1 percent gain in July, an increase that was driven by strong sales fueled by attractive incentive offers.

Orders for commercial aircraft shot up 9.4 percent in August, while orders for military aircraft (search) were up 15 percent.

Outside of transportation, the strength last month was led by a 5.5 percent rise in orders for computers and other electronic products.

Demand for primary metals (search) such as steel rose by 9.2 percent, while orders for machinery were up 3.5 percent.

Total orders for manufactured goods rose by a seasonally adjusted $6.8 billion to $210.9 billion.

Shipments of durable goods, considered a good signal of current demand, rose 1.7 percent to $208.5 billion.