Factory orders rose 0.3 pct in September

[November 04, 2011]  WASHINGTON (AP) -- Companies increased overall orders to U.S. factories slightly in September but demand in a key category that tracks business investment plans jumped by the largest amount in six months.

Total factory orders increased for a third straight month, edging up 0.3 percent, the Commerce Department reported Thursday. Demand for core capital goods, the category that serves as a proxy for business investment spending, jumped 2.5 percent, the largest increase since a 5.4 percent rise in March.

The surge in demand for capital goods reflected significant increases in demand for heavy machinery and computers. These gains were seen as a positive sign for the weak economy that businesses are sticking with their plans to expand and modernize their operations.

The report on factory orders covers durable goods, items expected to last at least three years, and nondurable goods, products such as paper, chemicals and clothing.

Orders for durable goods fell 0.6 percent, reflecting weakness in commercial aircraft and autos. Orders for nondurable goods such as gasoline, chemicals, food and paper, were up 1 percent in September after no gain in August.

The strength in core capital goods helped lift the economy in the third quarter. Overall economic growth posted a rebound to 2.5 percent at an annual rate in the July-September period, much faster than the 0.9 percent rate of increase from January through March.

Part of that rebound reflected a boom in business investment in equipment and software, which grew at a sizzling annual rate of 17.4 percent in the third quarter. Economists said these gains are being supported by a tax break that lets businesses write off investments this year on an accelerated basis as long as the purchases were made before Dec. 31.

The overall 2.5 percent growth has helped ease fears that the economy could be slipping back into a recession. Still, it would need to be nearly double that rate to make a significant dent in the unemployment rate, which remained stuck at 9.1 percent in September for a third straight month.

Manufacturing has helped to drive growth since the recession ended. But factory production slowed in the spring -- particularly at U.S. auto plants -- after the Japan earthquake and tsunami disrupted supply chains.

The Institute for Supply Management reported this week that its manufacturing index dipped slightly to 50.8 in October from a reading of 51.6 in September. Any reading above 50 indicates expansion.

While orders for motor vehicles and parts fell 2.1 percent in September after an even bigger 5.4 percent August drop, the expectation is for gains in this category in coming months, reflecting stronger consumer demand.

Automakers reported stronger sales in October, a hopeful sign that this key segment of the economy will be supported by higher demand in coming months. Sales are now back at the same pace they were before the March earthquake in Japan disrupted supplies and left many U.S. dealers with a shortage of popular Japanese models.

[Associated Press; By MARTIN CRUTSINGER]

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