updated 4/25/2007 11:43:17 AM ET 2007-04-25T15:43:17

Orders to U.S. factories for big-ticket manufactured goods rose in March at the fastest clip in three months, helped by the biggest jump in orders by businesses to expand and modernize in 2½ years.

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The Commerce Department reported Wednesday that demand for durable goods rose 3.4 percent last month compared with February. That was significantly better than the 2.5 percent increase that had been expected.

Much of the strength last month came from a 37.6 percent surge in demand for commercial aircraft. However, orders for business capital goods excluding aircraft also posted a strong gain of 4.7 percent.

That was the best showing for this closely watched category of business investment since a 7.9 percent rise in September 2004. The rebound came after two consecutive monthly declines had increased worries that troubles in housing and auto manufacturing were beginning to cause other businesses to grow more pessimistic about the future.

The 3.4 percent rise in total orders pushed demand for durable goods up to $214.9 billion in March following a 2.4 percent increase in February, which was previously reported as a weaker 1.7 percent rise.

Manufacturing has endured a slowdown in recent months, reflecting troubles in the housing industry, which have cut demand for construction equipment, and weakness in autos, where U.S. car makers are struggling to reduce an overhang of unsold cars.

The manufacturing weakness mirrors weakness in the overall economy, where growth has been depressed for the past year.

Many economists believe the economy slowed to an annual growth rate of just 1.8 percent in the first three months of this year, which would be the weakest showing since the end of 2005 when the country was struggling to cope with the devastation from Hurricane Katrina. The government will release its first look at growth in the gross domestic product for the January-March period on Friday.

The strength in aircraft orders pushed overall demand for transportation goods up by 8 percent in March. Orders for new cars and trucks rose by 3.3 percent, the best showing since December, and a sign that automakers are beginning to get control of their inventory levels.

Orders for computers dropped by 4.2 percent last month but demand for communications equipment shot up 12.3 percent and orders for primary metals such as steel were up 2.5 percent, rebounding from a 3.7 percent drop in February.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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