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Factory orders rise
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July 3, 2001: 11:10 a.m. ET
Surprising gain in May orders is latest sign of U.S. manufacturing strength
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NEW YORK (CNNfn) - Orders to U.S. factories rose in May, the government reported Tuesday, the latest sign of recovery in the beleaguered manufacturing sector of the world's largest economy.
Factory orders rose by 2.5 percent in May, the Commerce Department reported, following a 3.4-percent decline the month before. Analysts polled by Briefing.com expected orders to rise by only 1.5 percent.
The advance was the largest since a 7.5-percent gain in June 2000, and came just a day after the National Association of Purchasing Management said its key index of manufacturing activity gained strength in June.
U.S. manufacturing has suffered most in an economic downturn that has led companies to drastically cut production and jobs. The Federal Reserve has cut interest rates six times this year, worried that the manufacturing slump and resulting job cuts would infect other parts of the economy -- sapping consumer confidence and spending, which accounts for two-thirds of the economy.
So far, that hasn't happened, and now the worst may be over for manufacturing.
Transportation, electronics orders strong
In Tuesday's report, orders for transportation products registered the biggest increase, rising 3.5 percent, following a drop of 9.4 percent in April. Much of the gain came from stronger demand for automobiles and car parts, the government said.
Excluding the often volatile transportation sector, factory orders jumped by 2.3 percent in May, the best showing in a year.
A week ago, the Commerce Department said orders for durable goods -- expensive, long-lasting items such as cars and computers -- rose 2.9 percent in May after falling 5.5 percent in April. Thus, Tuesday's report of higher factory orders was not surprising.
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Orders for computers and electronic products increased 2.3 percent in May, after falling 13.7 percent in April. A huge increase in orders for semiconductors was a major factor in the advance.
The increase in the computer and electronics sector should encourage economists. One of the reasons the Fed cited for cutting interest rates has been weak investment by businesses in computers and other high-tech equipment. The economic boom was fueled in part by strong spending in these areas. 
- from staff and wire reports
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Factory orders report
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