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Orders placed with U.S. factories rose less than forecast in July, restrained by a decline in non-durable goods such as oil and food that masked a jump in demand for new equipment that was larger than previously estimated.

Bookings gained 1.3 percent after a revised 0.9 percent increase in June that was larger than previously estimated, the Commerce Department said today in Washington. The 1.9 percent decrease in orders for non-durable goods, which may reflect lower prices, was the biggest this year.

Makers of durable goods from Intel Corp. to Rockwell Collins Inc. are among those seeing demand stabilizing as customers here and abroad, buoyed by growing profits and more accessible credit, begin to invest in new equipment. A rebound at automakers resulting from the government’s “cash-for- clunkers” plan may give orders an added boost in coming months as dealers restock.

“Inventories are very lean and businesses are now going to have to increase production given the gain in orders,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York.

Factory orders, while increasing the most in a year, were forecast to rise 2.2 percent, after a previously reported 0.4 percent gain in June, according to the median of 63 estimates in a Bloomberg News survey. Projections ranged from increases of 0.6 percent to 4.5 percent.

Stocks Fell

U.S. stocks resumed their decline after the report. The Standard & Poor’s 500 Index fell 0.3 percent to 994.63 at 10:31 a.m. in New York. The Dow Jones Industrial Average lost 0.2 percent to 9,289.06.

Orders for durable goods, which make up just less than half of total factory demand, surged 5.1 percent, the most in two years and exceeding the 4.9 percent gain the government estimated last week.

Demand for transportation equipment, which tends to be volatile, jumped 19 percent, led by a 105 percent surge in bookings for commercial aircraft. Autos were down 1.3 percent.

Rockwell Collins Chief Executive Officer Clayton Jones said yesterday the decline in business-aircraft sales may be slowing after a slump in demand from last year.

“The bleeding is about to stop, and we’re going to see some stabilization maybe this quarter and next,” Jones said at a Morgan Stanley conference broadcast online.

Auto Sales

A report yesterday showed sales of cars and light trucks jumped in August to a 14.1 million rate, the highest level since May 2008, helped by the government’s cash-for-clunkers program. “The economy is now out of the recession and recovering,” said Michael DiGiovanni, the sales analyst for Detroit-based General Motors Co. “This is still going to be a bumpy ride. There’s still some caution out there.”

The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. It produced almost 700,000 auto sales before it concluded, the Transportation Department said Aug. 26.

Outside of transportation industries, orders fell 0.7 percent.

Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 0.3 percent after a 3.8 percent gain. Shipments of those goods, used to calculate gross domestic product, increased 0.8 percent, more than estimated last week.

ISM Report

Manufacturing, which makes up about 12 percent of the world’s largest economy, grew in August for the first time in 19 months, a report from the Institute for Supply Management yesterday showed. The group’s measure of new orders reached the highest level since December 2004.

Demand is rising after companies trimmed stockpiles at a record pace in the first half of the year. Inventories dropped at a record $159.2 billion annual rate in the second quarter, the Commerce Department said last week. They dropped at a $113.9 billion in the first three months of the year.

Factory inventories fell 0.7 percent in July, the smallest decrease since November. Manufacturers had enough goods on hand to last 1.4 months at the current sales pace, down from 1.41 months in June, the department said.

Intel, the world’s largest chipmaker, last week increased its sales forecast for this quarter and projected a recovery. It has credited consumers in Asia as leading the rebound in demand for personal computers.

U.S. exports in May and June showed the biggest two-month gain in almost a year.

Wholesale energy costs dropped 2.4 percent in July and food prices fell 1.5 percent, according to figures from the Labor Department. Those price declines may have influenced the drop in non-durable goods orders.

Source

Filed under: finance by Finance Boss