FACTORY ORDERS jump 2.5 percent in May

<br>WASHINGTON (AP) _ Orders to U.S. factories rebounded in May posting their best performance in nearly a year. Stronger demand for cars and semiconductors led the way. <br><br>The Commerce Department

Tuesday, July 3rd 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories rebounded in May posting their best performance in nearly a year. Stronger demand for cars and semiconductors led the way.

The Commerce Department reported Tuesday that factory orders rose by 2.5 percent in May, following a 3.4 decline the month before.

The latest snapshot of manufacturing activity was better than many analysts were expecting. They had forecast that factory orders would rise by 1.5 percent in May. The advance was the largest since a 7.5 percent gain registered in June 2000.

On Wall Street, stocks fell on a series of earnings warnings that reminded investors that companies will continue to report disappointing results for a while. The Dow Jones industrial average lost around 40 points and the Nasdaq was off around 4 points in morning trading.

To stave off recession, the Federal Reserve has cut interest rates six times this year. The most recent one, by a quarter-point, came last week. Each of the five others had been half-point moves.

The economy has been mired in a slowdown since last year with the manufacturing sector hardest hit, forcing companies to cutback production and lay off workers.

But recent reports offered signs that the economy may be improving.

The National Association of Purchasing Management on Monday said its key gauge of industrial activity rose in June, turning in its best performance in seven months. Even with the improvement, the measure was at a level indicating that the manufacturing sector of the economy remained in recession.

Still, economists were heartened that the index regained some lost ground and were hopeful that the worst of manufacturing recession may be over.

In Tuesday's report, orders for transportation products registered the biggest increase, rising 3.5 percent, following a drop of 9.4 percent in April. Much of the gain came from stronger demand for automobiles and car parts, the government said.

Excluding the often volatile transportation sector, factory orders jumped by 2.3 percent in May, the best showing in a year.

Orders for computers and electronic products increased 2.3 percent in May, after falling 13.7 percent in April. A huge increase in orders for semiconductors was a major factor in the advance.

The increase in the computer and electronics sector should encourage economists. One of the reasons the Fed cited for cutting interest rates has been weak investment by businesses in computers and other high-tech equipment. The economic boom was fueled in part by strong spending in this areas.

Meanwhile, orders for industrial machinery rose 2.7 percent in May, after a 0.8 percent increase, and orders for primary metals, including steel, grew by 5.6 percent, following a decline of 2 percent.

Orders for electrical equipment and home appliances went up by 0.9 percent after being flat in April.

Shipments, a good sign of current demand, rose 2.6 percent in May, after falling by 2.4 percent in April.