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WASHINGTON - Orders placed with U.S. factories fell for the first time in four months, the Commerce Department said Monday, with demand dropping sharply for commercial airplanes and parts.
Factory orders declined by 0.1 percent in August, after an increase of 1.7 percent in July. August's drop was the first since April, when orders declined by 1.1 percent.
Economists had expected an August increase of about 0.3 percent.
"Overall, the headline number is a little weaker than expected, but the report as a whole is still indicative of solid factory conditions," said Steve Stanley, chief economist at RBS Greenwich Capital, in Greenwich, Conn.
Orders for durable goods - costly manufactured items expected to last at least three years - fell by 0.3 percent. That was better than a previous estimate of a 0.5 percent drop.
The outlook for manufacturing brightened when orders for transportation equipment were excluded from the data, with demand for nontransportation goods rising by 1.3 percent. That marked the biggest increase since March.
For nondurable goods, which includes food and clothing, orders rose by 0.2 percent.
On Wall Street, stocks were higher, with lower oil prices and a bullish Federal Reserve forecast.
Stocks received a boost before the session opened when Philadelphia Federal Reserve president Anthony Santomero said in a speech he expected the economy to grow by 3.5 percent to 4 percent through 2005. His comments and the buying that customarily opens a new quarter gave stocks their gains - although analysts said recent economic data and the forecast for third-quarter earnings might not support the bullishness.
"You've had some fundamental chinks in the armor that have shown themselves over the week, with the economic data and the preannouncement warnings we've seen," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research. "This buying is kind of disconnected from that, and it should come back to earth in a few days."
The Dow Jones Industrial Average rose 23.89, or 0.2 percent, to 10,216.54, its second straight positive session. The Dow climbed 112.38 on Friday.
Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 3.67, or 0.3 percent, at 1,135.17, and the Nasdaq composite index gained 10.20, or 0.5 percent, to 1,952.40.
Citing signs of some economic improvements, the Federal Reserve last month boosted short-term interest rates for a third time this year. That pushed up a key rate to 1.75 percent, still low by historical standards. The Fed wants to make sure that inflation doesn't become a problem for the economy.
The health of the economy and the availability of jobs are frequent sparring issues on the presidential campaign trail. President Bush says his tax cuts have helped the economy rebound and have spurred job creation. His Democratic opponent, John Kerry, says the tax cuts have benefited mainly the wealthy, squeezed the middle class and plunged the government's balance sheets deeper into red ink.
Although growth in the nation's payrolls picked up in August, the economy is still down 913,000 jobs since Bush took office in January 2001. New jobs figures are released Friday.
The economy should grow by 4.3 percent this year, a solid performance that would be better than last year's 3 percent growth in the gross domestic product, according to a new forecast released Monday by the National Association for Business Economics. However, the previous NABE forecast in May had put GDP growth at an even faster 4.7 percent, which would have been the strongest growth rate in 20 years.
"After a "soft patch' in the spring quarter, the economy appeared to find firmer footing this summer," said Duncan Meldrum, NABE president and chief economist at Air Products & Chemicals Inc. The group trimmed its quarterly outlook to GDP growth at a 3.5 percent rate in the July-September quarter and 3.8 percent in the final three months of the year, down from the stronger 4.1 percent growth rate in both quarters that NABE had forecast in May.
In Monday's report, overall factory orders in August were weighed down by a 42.9 percent drop in demand for commercial aircraft and parts. Defense communications equipment also posted a steep decline of 27.8 percent.
Those declines masked gains elsewhere, including in such categories as household appliances and lighting equipment, construction machinery, nondefense communications equipment, electronic components and power transmission equipment.