Economy Businesses ordered more long-lasting goods Overall factory orders, however, fell 0.2 percent

By Christopher S. Rugaber

AP Economics Writer

WASHINGTON (AP) -- Businesses ordered more computers, communications equipment and other big-ticket items in August, a hopeful sign for the slumping economy.

Orders for capital goods, which are considered a good measure of business investment plans, rose 0.9 percent in August, the Commerce Department said Tuesday. It was the second gain in three months.

Overall factory orders fell 0.2 percent, after rising a downwardly revised 2.1 percent in July. A sharp decline in orders for autos and auto parts dragged down the overall total. But that follows July's jump in automotive orders, which was the biggest increase in eight years. Automakers are returning to full production after output was interrupted by Japan's March 11 earthquake.

Economists pay close attention to orders for capital goods, which exclude volatile demand for defense or transportation goods. Businesses typically order more industrial machinery and other capital goods when they are confident in the economy.

Shipments of capital goods rose 2.8 percent in August, the fourth consecutive gain. The government looks closely at shipment data when calculating economic growth.

The increase in orders and shipments suggests businesses kept investing in their companies during a difficult month. Stocks fluctuated wildly, Europe's debt crisis intensified and a raft of data showed the economy was more vulnerable to another recession.

Business spending should help boost growth in the July-September quarter. Many economists estimate growth will reach an annual pace of 2.5 percent in the quarter, an improvement from the 0.9 percent pace in the first six months of this year.

Orders of non-durable goods, such as food, beverages, and oil and gas, dropped 0.3 percent in August. That was mostly because oil prices fell sharply in August. Factory orders are calculated based on their dollar value.

Several reports Monday suggested the economy is growing but not enough to lower the unemployment rate, which is at 9.1 percent.

Macroeconomic Advisers, an economic consulting firm, expects the economy will expand at an annual pace of 2.5 percent in the July-September quarter. That's up from an earlier estimate of 2.1 percent.

The economy needs to grow by at least 4 percent to 5 percent for a year to significantly reduce unemployment.

Published: Wed, Oct 5, 2011


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