Factory Orders Rise in Aug.; Retail Sales Strengthen

U.S. factory orders rose in August, driven by strong demand for aircraft and electronic components, the government said Wednesday in a report which suggested a slowing but still healthy economy.

Separately, in a preview of some economic data coming today, U.S. retailers’ sales at stores open at least a year rose about 3.5% in September as consumers bought clothing at marked-down prices and picked up housewares and electronics, analysts said.

The forecast for same-store sales from Bank of Tokyo-Mitsubishi Ltd. measures the results of 80 chains compared with the same month a year earlier. The estimated sales gain is smaller than August’s 4.2% rise and the 6.7% increase recorded in September 1999.

Generally, retailers’ sales have lagged behind their 1999 performance, their best in more than a decade. Gap Inc. said Wednesday that its sales fell 8%, the retailer’s fifth straight decline in monthly same-store sales, even as the owner of Gap, Old Navy and Banana Republic stores advertised aggressively and marked down prices.

The Commerce Department said factory orders rose 2.0% to a seasonally adjusted $382.5 billion after a sharp 8.1% drop in July, leaving orders trending lower from their recent peak seen in June.

Economists view the series as particularly volatile and point to trends rather than monthly data as more indicative of the overall economic climate.

July’s unexpectedly large decline--originally reported as 7.5%--was driven by weak demand for transportation equipment, such as aircraft, which suffered its largest drop on record.

In August, demand for durable goods rose 2.9% to $215.9 billion. August’s gains were driven by a 6.6% rise in demand for transportation goods, particularly commercial aircraft. Demand for aircraft, space vehicles and parts surged 45.9%. Given the high costs of aircraft, the shift of even a small number of orders from one month to the next can cause huge swings in the data.

The report was broadly in line with economists’ expectations of a 1.8% gain in factory orders and had little impact on financial markets, which are keenly awaiting Friday’s employment report for September.

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Factory Orders

In billions of dollars, seasonally adjusted:

August: $382.5

Source: Commerce Department