June Factory Orders Rise Strongly

WASHINGTON – America's manufacturers saw demand for big-ticket products rise in June by the largest amount since the beginning of the year, a fresh sign that the battered sector is making a comeback.

The Commerce Department (search) reported Friday that new orders for "durable" goods — costly manufactured products expected to last at least three years — increased by a solid 2.1 percent from May. That represented the biggest advance since January and marked a stronger performance than the 1.2 percent rise that economists were forecasting.

In May, orders to factories for big-ticket goods were flat as manufacturers struggled to regain their footing after watching orders fall by 2.4 percent in April.

Manufacturing has had the hardest time trying to fully recover from the 2001 recession. Factories have cut production and workers amid lackluster demand at home and overseas, where countries are struggling with a global economic slump.

At the same time, manufacturers have to compete against a flood of imported goods flowing into the United States.

However, Friday's report along with other economic data on factory activity suggest that the industry is turning a corner, which is good news not only for manufacturers but also for the national economy's efforts to get back to full throttle.

In June, orders for machinery rose by 4.4 percent, the largest increase in nearly a year, and a turnaround from a 0.9 percent drop in May.

Orders for automobiles went up by 2.2 percent in June, an improvement over the 0.6 percent decrease registered in May.

For all transportation products, including cars, orders increased 3.9 percent in June, compared with a 2.1 percent drop the month before.

Excluding transportation orders, which can swing widely from month to month, orders for all other big-ticket goods grew by 1.4 percent in June.

For electrical equipment and home appliances, orders rose by 3.8 percent in June, reversing May's 1.4 percent drop.

Computer orders rose 0.8 percent in June, up from a 0.2 percent increase.

A few soft spots: orders for communications equipment plunged 9.6 percent in June, on top of a 6 percent drop the month before. Orders for fabricated metal products dipped 0.4 percent in June after a 3.5 percent increase.

In a bid to energize the economy, the Federal Reserve (search) on June 25 cut a key interest rate by quarter-point to 1 percent, a 45 year low. Economists believe the Fed is likely to hold rates steady at its next meeting on Aug. 12.

Federal Reserve Chairman Alan Greenspan (search) and private economists are hopeful the economy, which has been poking along, will pick up speed in the second half of this year as near rock-bottom short-term interest rates and President Bush's fresh round of tax cuts take hold.

Policy-makers are banking on the notion that the combination of extra cash from tax cuts and lower borrowing costs will motivate consumers and businesses to spend and invest more, which would boost economic growth.