New orders for U.S.-made goods increased for a second straight month in January, suggesting the recovery of the manufacturing sector was gaining momentum as rising prices for commodities spur demand for machinery.
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Factory goods orders rose 1.2 percent, the Commerce Department said on Monday after an unrevised 1.3 percent jump in December. Economists polled by Reuters had forecast factory orders advancing 1.0 percent in January.
Factory orders were up 5.5 percent from a year ago. Total shipments of manufactured goods increased 0.2 percent after surging 2.5 percent in December.
Manufacturing, which accounts for about 12 percent of the U.S. economy, is regaining its footing after being buffeted by lower oil prices, a strong dollar and an inventory overhang.
The nascent recovery was underscored by a survey last week showing a gauge of national factory activity jumped to a 2-1/2-year high in February.
Manufacturing could be boosted by the Trump administration's proposed tax reform, which would include corporate tax cuts. Promises of a lower corporate tax bill have buoyed business confidence in the last few months, but are yet to translate into strong business investment on capital goods. The Commerce Department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - slipped 0.1 percent in January instead of the 0.4 percent drop reported last month.
Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, fell 0.4 percent in January. They were previously reported to have declined 0.6 percent.
The weakness in shipments points to continued sluggish growth in business spending on equipment, which increased at a 1.9 percent annualized rate in the fourth quarter. That was the first rise in over a year.
U.S. stocks and the dollar were trading lower in mid-morning trading. Prices of U.S. Treasuries also fell.
In January, orders for transportation equipment accelerated 6.2 percent, reflecting a 62.2 percent surge in defense aircraft orders. There was also a 69.8 percent jump in orders for civilian aircraft. Outside transportation, orders for machinery increased 0.9 percent.
Orders for computers and electronic products fell 1.9 percent and bookings for electrical equipment, appliances and components declined 2.6 percent. Orders for fabricated metal product rose 2.3 percent.
Unfilled orders at factories fell 0.4 percent after declining 0.8 percent in December. Unfilled core capital goods orders increased 0.4 percent in January after a similar gain in the prior month.
Inventories of goods at factories rose 0.2 percent in January. They have increased in six of the last seven months. The inventories-to-shipments ratio was 1.31 in January, unchanged from December. (Reporting by Lucia Mutikani; Editing by Paul Simao)