US factory orders expected to show huge July gain reflecting surge in aircraft demand

Economic IndicatorsAssociated Press

The Commerce Department releases its report on orders to U.S. factories for July. The report will be released Wednesday at 10 a.m. Eastern.

ORDERS SURGE: The expectation is that orders rose 11 percent in July, according to a survey of economists by data firm FactSet.

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AIRPLANE STRENGTH: The huge increase was expected to be driven by soaring demand for commercial aircraft, a very volatile category.

In a preliminary report last week, the government said that demand for long-lasting durable goods jumped 22.6 percent in July, the biggest one-month gain on record, propelled by a record 318 percent increase in orders for civilian aircraft.

But outside of the transportation category, durable goods orders actually fell 0.8 percent.

Despite the weakness outside of transportation seen in July, most economists believe that manufacturing production will provide solid support for economic growth in the second half of this year.

While a key category viewed as a proxy for business investment plans dropped 0.5 percent in July, the dip followed a sizable 5.4 percent increase in June. The government reported last month that investment by businesses in new equipment grew at a solid 10.7 percent annual rate in the April-June period, erasing a decline in the first three months of the year.

Factory output rose for a sixth consecutive month in July, increasing by 1 percent. The gain was led by a jump in production of motor vehicles, furniture, textiles and metals.

In a sign that momentum in manufacturing was continuing, the Institute for Supply Management reported Monday that its gauge of manufacturing activity grew in August by the strongest pace in more than three years as factories cranked out more goods and new orders rose.

The index rose to 59 from 57.1 in July. That was the highest reading since March 2011. Any measure above 50 signals that manufacturing is growing.

One potential threat to the optimistic outlook for U.S. manufacturing is a slowdown overseas. Turmoil in Ukraine, the lingering problems from Europe's debt crisis and slower growth in China could all weigh on U.S. exports to key overseas markets.