Autos lead factory orders higher

New orders for U.S. factory goods rose for a second straight month in July on strong demand for automobiles, which could help to keep manufacturing supported as it deals with a strong dollar and softening global demand.

The Commerce Department said on Wednesday new orders for manufactured goods increased 0.4% after an upwardly revised 2.2% rise in June.

Factory activity has been hobbled by a strong dollar and spending cuts in the energy sector after last year's sharp plunge in crude oil prices. Tepid global demand is also hurting manufacturing, which accounts for about 12% of the domestic economy.

A report on Tuesday showed the manufacturing industry braked to a more than two-year low in August, with some economists blaming the slowdown on the recent global stock market sell-off.

Economists polled by Reuters had forecast factory orders rising 0.9% in July after a previously reported 1.8% increase in June.

The dollar has gained 16.8% against the currencies of the United States' main trading partners since June 2014, which has undercut export growth and weighed on the profits of multinationals.

Orders for transportation equipment rose 5.5 % in July as bookings for motor vehicles and parts increased 4.0%, the largest gain in a year. Orders for automobiles are likely to remain strong after sales surged in August.

In July, there were increases in orders for machinery, electrical equipment, appliances and components, and computers and electronic products.

The Commerce Department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans – increased 2.1% instead of the 2.2% rise 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, increased 0.6% in July, unchanged from last month's estimate.

Inventories of factory goods slipped 0.1% after three straight months of gains. That left the inventories-to-shipments ratio at a lofty 1.35, unchanged from June.

That suggests manufacturers might be sitting on a pile of unwanted goods, which could hurt production and weigh on growth in the coming quarters. Unfilled orders at factories rose 0.2%, increasing for a second straight month.

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