Durable goods orders surge 4.9%

Biggest gain in two years beats expectations and is latest indication of nascent recovery.

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WASHINGTON (Reuters) -- New orders for long-lasting U.S. manufactured goods recorded their biggest gain in two years in July, buoyed by a surge in aircraft orders, a government report showed Wednesday.

Durable goods orders jumped 4.9%, the largest advance since July 2007, after falling by a revised 1.3% in June, previously reported as a 2.2% drop, the Commerce Department said.

Analysts polled by Reuters had forecast orders rising 3% in July. However, compared to the same period last year, new orders were still down 25.8%.

U.S. stock index futures briefly rose on the report and then dropped, while government bond prices were unchanged.

"The headline figure was up more much than expected, driven by a large increase in the transportation sector, not surprisingly. Excluding that, it was about as expected," said Dan Greenhaus an analyst at Miller Tabak & Co. in New York.

Orders in July were boosted by a surge in civilian aircraft orders at Boeing (BA, Fortune 500) while the reopening of Chrysler and General Motors assembly plants after emerging from bankruptcy raised automobiles output and led to an increase in orders for motor vehicles.

New orders for transportation equipment jumped 18.4%, the biggest increase since September 2006, while capital goods orders rose 9.5% in July --- the largest gain since December 2007.

New orders excluding transportation climbed 0.8% in July, rising for a third straight month, a touch below market expectations for a 0.9% advance, after a 2.5% increase in June. It was the first successive three-month advance since the first quarter of 2006.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, slipped 0.3% in July. Analysts polled by Reuters had expected core capital goods to increase 1%.

The prior month was revised to show a 3.6% rise, previously reported as a 2.6% increase.

Durable goods orders are a leading indicator of activity in manufacturing, which in turn provides a good barometer for overall business health.

Durable goods inventories fell 0.8% in July, after declining 1.5% the prior month. Shipments increased 2% after rising 0.7% in June. To top of page

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