BUSINESS

Orders placed with US factories rose 1.5 per cent in June to record with aircraft demand up

08/02/2013 10:24 EDT | Updated 10/02/2013 05:12 EDT
WASHINGTON - Orders placed with U.S. factories rose to a record high in June, boosted by strong demand for airplanes, machinery and autos.

Factory orders rose 1.5 per cent in June compared with May, when orders had risen 3 per cent, the Commerce Department reported Friday. The gains pushed total orders to a record $496.7 billion.

It was the second month that factory orders have been at an all-time high, surpassing the previous record set in June 2008. Demand for factory goods had plunged during the recession.

Orders in a key category that tracks business investment rose 0.9 per cent in June, the fourth consecutive monthly gain.

Manufacturing struggled in the early part of this year, held back by weaker global growth and steep government spending cuts. But those trends may be starting to reverse.

Orders for durable goods, items expected to last at least three years, rose 3.9 per cent in June. That represented a slight downward revision from a preliminary report which had put the increase at 4.2 per cent.

Orders for nondurable goods such as chemicals, paper and food fell 0.6 per cent in June after a 0.8 per cent increase in May.

Demand for machinery increased 2.6 per cent in June, led by a 44.1 per cent surge in oil and gas drilling equipment.

Demand for transportation products rose 12 per cent, reflecting a 32.1 per cent jump in orders for commercial aircraft. Demand for autos was up 2 per cent.

Aircraft orders are volatile from month to month. Boeing said it received orders for 287 planes in June, up from 232 in May. Excluding transportation goods, orders fell 0.4 per cent in June after a 1 per cent rise in May.

The Institute for Supply Management reported Thursday that its index of manufacturing activity jumped to 55.4 in July. That was the fastest pace in two years and up from a June reading of 50.9. A reading above 50 indicates growth.

The gain in the index showed that factories revved up production to meet a surge of new orders in July.

Stronger growth at U.S. factories could aid a sluggish economy that has registered tepid growth over the past three quarters. And it could provide crucial support to a job market that has begun to accelerate but has added mostly lower-paying service jobs.

Businesses are placing more orders that are likely to be filled in the next few months. Steady gains in new-home sales and construction are supporting strong growth in industries such as wood products, furniture, and electrical equipment and appliances. And healthy auto sales are buoying growth in the production of metal parts and components.

Auto companies reported solid sales gains for July on Thursday. Ford, Chrysler and Nissan each saw sales grow 11 per cent compared with the same month a year ago.

The economy grew at a lacklustre 1.7 per cent annual rate in the April-June quarter. That's better than the 1.1 per cent rate in the first quarter, but it's still far too sluggish to quickly reduce unemployment.