Factory orders fall in June

WASHINGTON (Reuters) - New orders received by factories fell in June, pulled down by weak demand for transportation equipment, government data showed on Wednesday.

The Commerce Department said orders for manufactured goods fell 0.8 percent after a revised 0.6 percent increase in May. Economists had forecast a 0.7 percent decline after a previously reported 0.8 percent rise.

Manufacturing has shouldered the economy's recovery and the slowdown in factory orders in June further diminished prospects of a strong and swift step-up in growth after a very weak first half.

Data on Monday showed manufacturing activity hit a two-year low in July. Gross domestic product growth slowed to an annual rate of 1.3 percent in the second quarter after a 0.4 percent pace in the January-March period.

Manufacturing accounts for about 12 percent of GDP.

The Commerce Department report showed transportation orders dropped 8.6 percent in June after a 5.8 percent increase the prior month. Orders excluding transportation ticked up 0.1 percent in June after being flat in May.

Unfilled orders rose 0.3 percent after increasing 0.9 percent in May.

The moderate rise in unfilled orders suggested an easing in the disruption in production caused by a shortage of inputs from Japan after the devastating earthquake in March.

Shipments rose 0.2 percent after being flat the prior month. Inventories increased 0.2 percent after rising 0.8 percent in May, indicating that stocks were not piling up, despite weak demand.

The department said orders for durable goods, manufactured products expected to last three years or more, fell 1.9 percent instead of the 2.1 percent drop reported last month. Orders excluding transportation were up 0.4 percent instead of a 0.1 percent gain.

Orders for non-defense capital goods excluding aircraft -- seen as a measure of business confidence and spending plans - rose 0.4 percent in June rather than the previously reported 0.4 percent fall. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)