Factory Orders Climb 1.7% in June

Orders placed with U.S. factories rose in June at the fastest rate in three months, paced by more bookings for cars, commercial aircraft and machinery, government data showed Monday.

Factory orders rose 1.7% for the month to $326 billion following a revised 0.3% gain in May, the Commerce Department said. Excluding transportation equipment, orders rose 1.2%. Economists had expected total orders to rise 1.5% to $325.4 billion.

The Commerce Department also said Monday that it had underestimated the value of construction spending in April, May and June. Some economists said that might mean the Labor Department would raise its estimate of the gross domestic product in the second quarter. That would mean the economy’s growth in the quarter was greater than the 2.4% annual rate reported last week.

Last week’s GDP report showed the biggest increase in business investment in three years. With inventories falling and demand improving, companies were ordering more from factories, suggesting production would increase in coming months.

Capital goods orders excluding defense and aircraft, a proxy for future corporate equipment spending, rose 1.7% in June, the biggest gain since March, the Commerce report showed.

The rise in factory orders in June confirmed suggestions from regional surveys that “manufacturing production is turning the corner,” said Jay Nazareth, an economist at J.P. Morgan Chase Bank in New York. “On the whole, the report was stronger than expected with upward revisions to capital spending and a smaller-than-expected decline in total manufacturing inventories.”

The June increase in orders was led by a 2.6% jump in bookings for durable goods, which accounted for more than half of the report. The rise was the largest since July 2002. Orders for motor vehicles rose 3%, the biggest gain since January of last year. Non-defense aircraft orders were 21.1% higher while machinery bookings rose 4%.

Orders for non-durable goods, which include industrial chemicals, drugs, papers and textiles, rose 0.7% in June after rising 0.6% the prior month.

Factory inventories fell 0.2% in June for a second month. The Commerce Department said it underestimated second-quarter construction spending, one of the components used to determine how fast the economy is growing, because of a “processing error.” Total construction spending in June is now reported at an annual rate of $872.5 billion, compared with the $864.3-billion pace the government reported Friday. Spending in May totaled $870.1 billion, up from $864.1 billion, and April was $871.9 billion, compared with the $868.1 billion first reported.