Factory orders up solid 2 percent in August after record drop

Wednesday, October 4th 2000, 12:00 am
By: News On 6

WASHINGTON (AP) _ Orders to American factories rose by a surprising 2 percent in August, after posting a record drop the month before. A big jump in demand for airplanes and other transportation equipment led the way.

The Commerce Department reported Wednesday that total factory orders grew to a seasonally adjusted $382.5 billion in August, up from $375 billion the month before. It marked the third increase in the last four months.

August's performance was stronger than many analysts were expecting. They had predicted factory orders would actually fall by 1.9 percent.

In July, factory orders fell by a record 8.1 percent, according to revised figures. That was even weaker than the 7.5 percent plunge the government estimated one month ago.

The Federal Reserve has boosted interest rates six times since June 1999 to slow the economy and keep a lid on inflation. On Tuesday, the Fed decided not to raise rates for a seventh time this year, but it still held open the door to further rate increases in the future should inflation flare up.

Orders for transportation equipment, which posted the biggest increase, grew by 6.6 percent in August, mostly due to stronger demand for airplanes and aircraft parts, the government said. In July, transportation orders fell by a record 32.6 percent, an even sharper decline than the government previously thought.

Excluding the volatile transportation category, factory orders rose 1.3 percent in August, the fifth increase in the last eight months. The transportation sector swings widely from month to month because it includes costly items such as airplanes, ships and military equipment including tanks.

Orders for electronic and electrical equipment, including household appliances and communications equipment, went up by 2.7 percent in August, mostly due to higher demand for electronic components. The month before, such orders fell by a sharp 18.9 percent.

Durable goods, big-ticket manufactured items expected to last at least there years, saw orders rise by 2.9 percent, following a 13.2 percent decline. For nondurables, such as fuel, orders rose 0.9 percent after a 0.7 percent drop in July. Chemicals had the largest increase.

Industrial machinery orders, including those for computers and machine tools, up five of the last six months, rose 0.9 percent in August, down from a big 5.1 percent increase the month before.

Orders for primary metals, which includes steel, were flat in August after a 2.5 percent decrease.

Shipments, a barometer of current production, went up by 1 percent in August following a 1.7 percent decline.