08/27 08:30

By Carlos Torres

Washington, Aug. 27 (Bloomberg) -- U.S. orders for durable goods rose more in July than at any time in the last nine months as demand increased for computers, cars and aircraft, government figures showed.

The 8.7 percent surge to $179.7 billion for big-ticket goods made to last at least three years was larger than expected and followed a revised 4.5 percent drop the previous month, the Commerce Department said. The July increase was the biggest since October of last year.

Consumers haven't let concerns about a sluggish stock market and weak job growth stop them from buying cars and homes. That may be helping to lift optimism among businesses that the recovery will resume and shows why sales at computer-network software maker Novell Inc. are rising.

``Demand is strong enough to sustain the momentum'' in the manufacturing recovery, said Brian Jones, an economist at Salomon Smith Barney Inc. in New York, before the report. The drop in June ``was just a temporary lull,'' he said.

Orders excluding transportation equipment rose 3.9 percent last month, erasing the revised decline in June. Today's statistics also suggest business investment in equipment may be on the verge of accelerating.

Orders for non-defense capital goods excluding aircraft, rose 8.1 percent in July after decreasing 6.3 percent a month earlier. Last month's increase was the largest since the government began keeping comparable records in 1992. Shipments, a proxy for business investment in equipment and software, rose 3 percent after falling 2.1 percent.

``Fears business leaders may have had about the drop in the stock market creating a double-dip recession may be disappearing,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, before the report. ``Confidence to spend should improve going into'' the fourth quarter.

Expectations

Economists had expected July durable goods orders to rise 1.5 percent to $168.5 billion after a previously reported decrease of 4.1 percent in June, based on the median of 58 forecasts in a Bloomberg News survey. Orders excluding transportation equipment were expected to rise 1 percent. The report no longer includes orders for semiconductors because some chipmakers have stopped taking part in the voluntary survey.

Inventories of durable goods fell 0.4 percent last month, today's report showed. Shipments rose 3.1 percent.

The economy expanded from April through June at a 1.1 percent annual rate, down from the first quarter's 5 percent pace. Manufacturing and services stalled in July and the economy added 6,000 jobs last month, a 10th as many as in June.

Rebound in Growth

Growth is likely to rebound to 2.6 percent at an annual pace this quarter and accelerate to 3 percent in the last three months of the year, according to this month's consensus Blue Chip Economic Indicators forecast.

Provo, Utah-based, Novell, the maker of software that competes with Microsoft Corp.'s Windows programs, said last week it turned a profit in the third quarter as sales rose 13 percent. Sales of Novell's directory programs and operating-system software rose 5.3 percent from the second quarter.

Federal Reserve policy makers have said that a rebound in business investment is key to sustaining the recovery.

``An important driver of the recovery will be the re- engagement of the business sector,'' said Anthony Santomero, president of the Federal Reserve Bank of Philadelphia last week. ``We are in the midst of the business recovery, but we still have some distance to go.''

Machinery and Computers

Machinery orders increased 11.8 percent last month, the biggest rise since comparable records began in 1992, after falling 8.3 percent in June, today's report showed.

Orders for computers and electronic products rose 3.9 percent last month after decreasing 4.6 percent. Communications equipment orders rose 10.4 percent last month.

Orders for transportation equipment increased 20.8 percent after falling 5.8 in June and bookings for motor vehicles rose 7.5 percent. Commercial aircraft orders jumped 121.6 percent.

General Motors Corp., the world's biggest automaker, raised its North American production plan for the third quarter to 1.262 million vehicles, up 17,000 or 1.4 percent from its plan a month ago. Production was stepped up as sales jumped 24 percent in July sales. Overall auto sales rose 8.2 percent last month from a year earlier as consumers took advantage of zero-interest financing at dealerships.

Orders for defense hardware fell 14.3 percent last month after increasing 18.2 percent in June. Orders excluding defense rose by a record 7.3 percent.

-- Anonymous, August 27, 2002