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U.S. factory orders rebound in July on transportation

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New orders for U.S. factory goods rose more than expected in July as demand for transportation equipment surged, a government report showed on Wednesday, pointing to some resilience in manufacturing at the start of the third quarter.

The Commerce Department said orders for manufactured goods increased 2.4 percent after a revised 0.4-percent fall in June.

Economists had forecast orders rising 1.9 percent after a previously reported 0.8-percent fall in June.

While the report showed strength in a sector that has carried the economic recovery, regional manufacturing surveys for August have shown a sharp drop in activity, raising the risk the factory sector may have stalled this month.

The Institute for Supply Management's index of national manufacturing activity probably fell to 48.5 in August, according to a Reuters survey, from 50.9 in July. A reading below 50 indicates a contraction in manufacturing.

The August ISM survey will be published on Thursday.

The Commerce Department report showed orders for transportation equipment jumped 14.8 percent in July, the largest increase since January, as demand for motor vehicles advanced 9.8 percent. That was the biggest gain since January 2003 and suggested that motor vehicle shortages caused by supply chain disruptions following the March earthquake in Japan were easing.

Civilian aircraft orders soared 43.4 percent, unwinding the prior month's 24 percent drop. Orders excluding transportation rose 0.9 percent in July after gaining 0.4 percent the prior month.

Unfilled orders rose 0.8 percent after climbing 0.3 percent in June, suggesting factories will have to ramp-up production. Shipments increased 1.6 percent after rising 0.6 percent the prior month, while inventories increased 0.5 percent. That was up from June's 0.4-percent increase.

The department said orders for durable goods, manufactured products expected to last three years or more, rose 4.1 percent instead of the 4.0-percent rise reported last week. Durable goods orders excluding transportation were up 0.8 percent rather than 0.7 percent.

Orders for non-defense capital goods excluding aircraft-seen as a measure of business confidence and spending plans-fell 0.9 percent in July instead of the previously reported 1.5-percent decline.

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