US factory orders up 1.9 percent in July, best in 9 months

WASHINGTON – Orders to U.S. factories increased in July by the largest amount in nine months, propelled by a big jump in demand for commercial aircraft. The key category that tracks business investment plans posted the best increase since January.

Factory orders rose 1.9 percent in July, the Commerce Department reported Friday. It was the biggest one-month gain since last October and was led by a surge in orders in the volatile category of commercial aircraft. Orders in the category that serves as a proxy for business investment increased 1.5 percent, the best showing since January.

Economists are hoping that after a period of weakness, business investment will begin to rebound in the second half of this year. Supporting that view, demand for oil field equipment rose for a third month.

The oil field and mining machinery category jumped by 45.6 percent in July but even after three months of strong gains, total orders in this category are 59.9 percent lower in the first seven months of this year compared to last year. The energy sector had cut back sharply on drilling and exploration in response to the huge drop in oil prices and this sector is only now starting to stabilize.

Orders for durable goods, everything from airplanes to appliances, rose 4.4 percent in July, the same as the estimate the government made in an advance report. Orders for nondurable goods such as chemicals and paper dropped 0.5 percent in July after rising 0.8 percent in June.

The 1.5 percent rise in orders in the investment category marked the third straight monthly increase, supporting forecasts that business investment will start providing support for the overall economy rather than holding back growth.

American manufacturers have struggled this year with a strong dollar, which has hurt exports and a drop in investment spending, particularly in the energy sector.

While economists believe manufacturing is showing signs of stabilizing, a report Thursday by the Institute for Supply Management showed that its closely watched gauge of manufacturing activity show a contraction in manufacturing in August, the first time that has occurred since February, as new orders and output plummeted in August and factories cut jobs.

Many economists said they believed that was a temporary setback and they are still looking for a manufacturing rebound in the second half of this year.