WASHINGTON – Orders to U.S. factories posted the best increase in three months in August as the manufacturing sector showed strength in the face of surging energy prices.
The Commerce Department (search) reported that orders rose by 2.5 percent to $395.2 billion, led by strong demand for computers and other electronic products. The increase followed a 2.5 percent drop in July which had fed worries that manufacturing, an energy-intensive sector of the economy, could falter as crude oil prices climbed to record levels.
However, the August rebound and a big jump in September in a closely watched gauge of manufacturing sentiment should ease those worries. The Institute for Supply Management (search) said that its index surged to a 13-month high of 59.4 percent in September despite the surge in energy prices and the battering the economy took from Hurricanes Katrina and Rita.
The 0.4 percent increase in total orders was the best showing since a 4.2 percent rise in May.
Orders for durable goods, items expected to last three or more years, were up 3.4 percent in August, slightly better than 3.3 percent increase that the government estimated in a preliminary report last week.
The strength was led by a 5.5 percent surge in orders for computers and other electronic products.
Demand for cars, airplanes and other transportation equipment rose by 1.4 percent in July after a 9.1 percent plunge in transportation orders in July.
Excluding the increase in transportation, total orders would have been up by 2.7 percent, the best showing in this category in 17 months.
Orders for nondurable goods posted a 1.6 percent increase after a 1 percent increase in July.
Manufacturing was the hardest hit sector in the 2001 recession and there had been concerns that businesses might start cutting back on their orders out of concern over what rising energy prices might do to the economy.
Analysts said the strong reading from the manufacturing gauge in September showed that so far manufacturing outside of the Gulf Coast (search) area has not been hurt by the hurricanes.
Economists still believe that the economy will see growth slashed by as much as a full percentage point in the second half of the year, reflecting a loss of perhaps 400,000 jobs from the hurricanes and the impact on consumer confidence from the surge in energy prices.