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Written by Martin Crutsinger, THE ASSOCIATED PRESS
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Wednesday, 03 September 2008 |
Canadian Auto Workers President Buzz Hargrove talks with media before entering a meeting with General Motors executives in Detroit, Friday. THE CANADIAN PRESS/ Dave Chidley
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WASHINGTON - Orders to U.S. factories rose by a larger-than-expected amount in July as demand for commercial aircraft, heavy machinery and iron and steel all posted solid gains.
The U.S. Commerce Department reported Wednesday that new orders increased by 1.3 per cent in July, much stronger than the 0.8 per cent increase economists had been expecting. The July advance follows an even bigger 2.1 per cent increase in June and represents the fifth straight rise in orders.
Manufacturers have seen a sharp slowdown in the U.S. economy offset by strong gains in foreign demand, helped by a weaker dollar which makes their products more competitive overseas.
The July strength was led by a 28.1 per cent jump in commercial aircraft, which rebounded from a 21.3 per cent decline in this volatile category in the previous month.
Orders in all transportation categories rose by 3.2 per cent in July, the best showing in five months. It was the second straight month that orders for motor vehicles rose, increasing by 0.6 per cent in July following an even bigger 3.2 per cent June advance. The gains were viewed as temporary, however, given that automakers are struggling with a weak economy and plunging demand for once-popular models because of high fuel prices.
Excluding transportation, factory orders would have risen by one per cent, slightly below the 1.5 per cent economists had been expecting.
Orders for durable goods, items expected to last at least three years, rose 1.3 per cent in July, unchanged from the preliminary estimate the government made last week. Orders for non-durable goods, products such as fuel, food and chemicals, increased 1.2 per cent in July.
A number of categories showed big gains in the month, too.
Demand for iron and steel jumped by five per cent, orders for machinery rose 4.1 per cent with demand for construction machinery soaring by 17.9 per cent.
Much of this strength reflects a boom in U.S. exports, the standout performer while the rest of the economy has been hit by the worst slump in housing in decades and a severe credit crunch.
But some economists have expressed worries about how long the export boom can last given spreading weakness in key overseas markets in Europe and Japan. Also, the dollar, which had been on a long slide, has come off its recent lows, which could translate into less of a price advantage for American products against foreign goods.
The government reported last week that the economy expanded at an annual rate of 3.3 per cent in the April-June quarter, more than three times the growth rate turned in during the first three months of this year. The concern is that a slowdown in exports will dampen manufacturing activity and consumer spending will falter as the effect of $92 billion in economic stimulus payments begins to wear off, however.
A closely watched gauge of manufacturing activity was down slightly in August at 49.9, compared to a reading of 50.0 in July, according to a report Tuesday from the Institute for Supply Management. Readings above 50 are considered a signal that the manufacturing economy is expanding and readings below 50 are seen as a signal that manufacturing is contracting.
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Last Updated ( Wednesday, 03 September 2008 )
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