updated 7/28/2004 11:50:38 AM ET 2004-07-28T15:50:38

After falling for two months, orders to U.S. factories for big-ticket durable goods rose 0.7 percent in June, the Commerce Department reported Wednesday.

Major Market Indices

The gain in orders for durable goods, items expected to last three or more years, followed declines of 0.9 percent in May and 2.7 percent in April. The drop in May had originally been reported as an even sharper 1.8 percent fall. Orders last rose in March, when they surged ahead by 5.9 percent.

The 0.7 percent June increase was slightly lower than what analysts had been expecting. Still, it gave hope that the fledgling rebound in the nation’s manufacturing sector was not in danger of stalling.

A number of business barometers flashed signs of weakness in June, leading Federal Reserve Chairman Alan Greenspan to declare last week that the economy was going through a “soft patch.”

However, he said that the slowdown was likely to be temporary with momentum being generated from rising employment in recent months.

The biggest orders increase went to transportation equipment, everything from cars to airplanes, which rose by $2.2 billion to $55.5 billion, an advance of 4.2 percent, reflecting strength in defense aircraft and parts. Excluding demand for military goods, new orders would have fallen by 0.4 percent last month, following even bigger declines of 0.6 percent in May and 2.1 percent in April.

Orders for non-defense capital goods were up 1.1 percent in June, following two months of declines. This category is closely watched because it provides an indication of business plans to expand and modernize.

Orders for machinery rose by 0.3 percent last month, but the category that includes computers and electronic parts was down by 1 percent. Communications equipment fell by 4.4 percent.

In the transportation category, demand for motor vehicles and parts rose by 1.3 percent but the biggest increase came in a 79.1 percent jump in orders for defense aircraft and parts. This surge followed a 23.8 percent rise in this category in May.

The Federal Reserve on June 30 raised interest rates for the first time in four years, boosting its target for the federal funds rate, interest that banks charge each other, from a 46-year low of 1 percent to 1.25 percent.

Economists believe this will be the first in a series of rate hikes in coming months as the Fed moves to make sure that a rebounding economy does not trigger inflation pressures.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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