Demand for long-lasting factory goods rebounded in July, a sign the manufacturing sector could continue to stabilize in the second half of the year.
Continue Reading Below
New orders for durable goods--aircraft, industrial machinery and other products designed to last at least three years-rose a seasonally adjusted 4.4% in July from the prior month, the Commerce Department said Thursday, the largest monthly jump since October.
Economists surveyed by The Wall Street Journal had expected a rise of 3.2%.
June's figures were revised to a 4.2% decline, from an earlier estimate of a 3.9% decrease. Through the first seven months of the year, durable goods orders were down 0.9%, compared to the same period in 2015.
The data suggest the manufacturing sector is firming in the second half of the year. The latest report reflects the first full month of data since the United Kingdom voted to leave the European Union in late June. After the vote, the dollar strengthened further against the British pound and euro, but it has fallen again since the end of July.
July's rise was led by more robust demand for transportation equipment, orders of which rose 10.5%. That was driven by the volatile category of civilian aircraft and parts, which showed a 89.9% increase in orders over the month. Separate data from Boeing Co., the largest aerospace company in the U.S., showed 73 orders for large jets in July, up from 12 in June.
Orders for durable goods excluding the transportation category rose 1.5% from June, and orders excluding defense rose 3.8% last month.
Data on durable-goods orders can be uneven from month to month and are often revised.
A closely watched proxy for business investment, new orders for nondefense capital goods excluding aircraft, rose for the second straight month in July. They were up 1.6% from June, the largest gain since January.
But orders in the category were still down 4.3% in the first seven months of the year, compared with the same period in 2015.
Investment in capital goods, such as machine tools or robotics equipment, is a key ingredient in boosting workers' wages and productivity, as well as corporate profits. The lack of business investment is a factor in the economy's sluggish growth and weak productivity gains. Productivity, or output per hour worked, fell for the third time in the second quarter, the longest streak of falling productivity since 1979.
After steadily climbing in the first few years of the recovery, manufacturing output has mostly flattened in the past two years. A sharp drop in oil prices curbed new investment in the energy sector, and a strengthening dollar made U.S.-made goods more expensive for overseas buyers. Still, steady hiring and low interest rates have stoked domestic appetite for some durable items, such as cars, helping counter the lack of capital investment and foreign demand.
But consumer demand can only go so far in spurring economic growth. Federal Reserve officials, who gather with other central bankers this week for an annual conference in Jackson Hole, Wyo., face the possibility the U.S. economy is stuck in a "new normal" of low growth and productivity.
The durable orders report is sync with other recent reports suggesting the U.S. manufacturing sector stabilized in July. A Federal Reserve report showed manufacturing output posted its largest monthly advance in a year in July. And the Institute for Supply Management's gauge showed manufacturing activity expanding in July for the fifth straight month.
Wednesday's report showed orders for motor vehicles and parts were flat in July. Demand for machinery rose 1.6%. Orders for computers and electronic products posted their largest increase since March 2015, up 3.6%.
Shipments of durable goods rose 0.2% during the month, but are down 1.1% compared with shipments in the first seven months of last year.
Write to Anna Louie Sussman at firstname.lastname@example.org and Josh Mitchell at Joshua.email@example.com