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US factory orders rise 2.1 percent in May as business investment rises at steady pace

Orders to U.S. factories rose in May, helped by a third straight month of stronger business investment. The gain suggests manufacturing is picking up after a weak start to the year.

The Commerce Department says factory orders rose 2.1 percent last month. April's increase was revised higher to 1.3 percent from 1 percent.

Most of the gain was due to a big jump in volatile commercial aircraft demand.

Still, businesses also ordered more machinery, computers and household appliances. That helped boost a measure of business investment spending 1.5 percent. It was the third straight gain for that category, which excludes volatile aircraft and defense orders. And gain was stronger than a 1.1 percent increase estimated last week in a preliminary report on May long-lasting manufactured goods.

Manufacturing has struggled this year after helping propel the economy in the first three years after the recession ended. U.S. factories have seen less demand for exports because of weaker global growth. And businesses reduced their investment in machinery and equipment in the first quarter.

The increase in business spending follows another report that shows manufacturing activity picked up in June. The Institute for Supply Management's index of manufacturing activity rose to 50.9 from 49. Any reading above 50 indicates expansion.

The ISM index showed that new orders and production both jumped. But a gauge of employment fell sharply, suggesting factories cut jobs for the fourth straight month.

The U.S. economy expanded at only a 1.8 percent annual rate in the first three months of the year, the Commerce Department said this week. That was much slower than its previous estimate of a 2.4 percent rate.

The main reason for the downgrade was consumers spent less on services than initially thought. Spending on long-lasting factory goods, such as cars and appliances, was stronger.

Economists expect growth remained tepid in the April-June quarter. Most estimates range between a rate of 1.5 percent and 2 percent.

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