Durable-Goods Orders Jump 8.7 Percent in July

Orders to U.S. factories for big-ticket goods, including cars and computers, jumped by 8.7 percent in July, the largest increase in nine months. Tuesday's report provided a fresh dose of good news for the struggling economic recovery.

The rebound reported by the Commerce Department came after orders for costly manufactured "durable" goods dropped by 4.5 percent in June from the month before. That decline had raised fears that consumers and businesses might be starting to seriously rein in their spending, something that would further slow economic growth.

The 8.7 percent increase in orders for durable goods -- items expected to last at least three years -- was the largest since a 9.2 percent advance in October. July's performance was far stronger than what analysts were predicting. Their forecasts ranged from a 1.4 percent advance to a 2.7 percent gain.

The strength in July was broad based, with new orders rising for virtually every category tracked, except for electrical equipment and appliances, where orders went down.

Orders for all transportation equipment soared 20.8 percent in July, more than erasing June's drop of 5.8 percent. Orders for cars, trucks and parts increased a strong 7.5 percent, following a 3 percent decline. And, orders for commercial planes and parts skyrocketed by 121.6 percent in July, a turnaround from the 46.6 percent decrease in June.

Excluding transportation equipment, durable-goods orders rose a solid 3.9 percent in July. And, excluding orders for goods used by the military, durables went up by a record 7.3 percent in July.

Tuesday's report may be a sign that the seeds are being sown for a turnaround in capital investment by the nation's businesses, a key ingredient to the economy's full recovery.

Orders for computers jumped 13.9 percent in July, after falling by 9.8 percent the month before. For communications equipment, orders rose 10.4 percent, following a 15.3 percent decline.

That's particularly good news for the high-tech sector, which was hard hit by last year's recession.

Meanwhile, orders for machinery rose by a record 11.8 percent in July, more than reversing a 8.3 percent decline in June.

Orders for fabricated metals rose 4.5 percent, after a 3.2 percent drop. And, orders for primary metals, including steel, nudged up 0.2 percent, following a 2.8 percent decline.

Hoping to give a boost to the recovery -- which has lost momentum from the beginning of the year -- the Federal Reserve has held short-term interest rates steady all year long.

Low rates might motivate consumers, the mainstay of the economy, to keep on spending, and induce businesses to increase capital spending and hiring, forces that would bolster economic growth.

One weak spot in Tuesday's report: orders for electrical equipment and appliances fell 1.6 percent in July, on top of a 1.3 percent decline in June.