Factory Orders See Largest Increase in 8 Months

American factories in July saw the biggest increase in orders for their products in eight months, the government said Wednesday, but signs persist that financial troubles in Asia are hitting home.

“The manufacturing side of the economy continues to be under some stress,” said David Orr, an economist with First Union Corp. of Charlotte, N.C.

Factory orders jumped 1.2% in July to a seasonally adjusted $335.2 billion, the Commerce Department said, with growth led by a rebound in demand for electronics and industrial machinery. It was the best showing since last November.

July was the second month of recovery in factory orders from a 2.2% drop in May that was the biggest in three years. In June, orders rose 0.3%--slightly more than originally reported.

Even with the two-month recovery, economists say U.S. manufacturers are feeling the effects of economic turmoil in Asia. Exports are plummeting, and imports, made cheaper by currency devaluations in Asia, are becoming more attractive to American consumers.

In July, orders for communications equipment were down 12.8%, for example, and demand for computers and office equipment slid 0.6%. U.S. manufacturers of both those product groups depend heavily on Asian markets.

Analysts also were troubled by the future implications of a widening gap between manufacturers’ inventories and shipments. Product inventories grew 0.3% in July, to $468.1 billion, while shipments dropped 0.1% to $334.9 billion.

Economists track factory orders because they’re a good indication of how busy manufacturers will be in the months ahead.

Reflecting the effects of Asia’s troubles, orders from April to June were 0.7% below the first three months of this year.

In July, orders for durable goods--products expected to last more than three years--were up 1.9% to $186.4 billion. This represented a slight downward revision from a preliminary estimate of a 2.4% increase.

Car production was affected this summer by strikes at General Motors. In July, orders for cars and other automotive products were down 2.1%.

Orders for nondurable goods rose 0.4% in July, led by books and textiles.

The total backlog of unfilled factory orders grew 0.1%.

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Factory Orders

New orders, in billions of dollars, seasonally adjusted:

July: $335.2

Source: Commerce Department