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Factory orders climb 1.1% in June

U.S. also logs home-price rise, growth for service firms


This article was published August 6, 2014 at 2:57 a.m.


An employee stains a tabletop last week at the Northland Furniture Co. in Bend, Ore. Factory orders rose in June, led by demand for aircraft, the Commerce Department reported.

WASHINGTON -- Orders to U.S. factories increased in June, led by demand for aircraft, industrial machinery and computers and electronics.

Orders rose a seasonally adjusted 1.1 percent compared with the previous month, the Commerce Department reported Tuesday. Factory orders had fallen 0.6 percent in May after three straight months of gains.

The report was one of three released Tuesday: U.S. home prices rose slightly in June and U.S. service firms grew in July at the fastest pace in more than eight years.

An 8.4 percent jump in demand for commercial aircraft fueled the latest gains in factory orders. But there were additional increases outside this volatile category that point to businesses investing with the expectation of economic growth.

Orders for machinery rose 2.9 percent. Iron and steel mills had a 1.7 percent increase in demand, while orders for computers and electronic products were up 2.9 percent.

Excluding military hardware, factory orders rose 1 percent in June from May.

Over the past year, factory orders were up 2.5 percent.

The improved outlook for business spending has helped drive growth. The economy grew at an annual rate of 4 percent in the April-June quarter, after slipping 2.1 percent during the first three months of the year when brutal winter weather closed some assembly lines.

Manufacturing has rebounded as the weather improved.

The Institute for Supply Management, a trade group of purchasing managers, reported Friday that its manufacturing index rose to 57.1, up from 55.3 in June. A reading above 50 signals that manufacturing is growing.

"The growth in manufacturing activity and capital spending is likely to continue next month, as indicated by a moderate increase in ISM new orders level in July," said Maninder Sibia, economist at Contingent Macro Advisors.

The increased demand has fueled hiring. The Labor Department said Friday that employers added more than 200,000 jobs in July for the sixth straight month. Factories accounted for 28,000 new jobs in July. Over the past year, manufacturers have added 178,000 jobs, the best 12-month stretch of hiring since November 2012.

U.S. home prices rose in June by the smallest year-over-year amount in 20 months, slowed by modest sales and more properties coming on the market.

Data provider CoreLogic said Tuesday that prices rose 7.5 percent in June compared with 12 months earlier. That's a solid gain but less than the 8.3 percent year-over-year increase in May and a recent year-to-year peak of 11.9 percent in February.

On a month-to-month basis, June prices rose just 1 percent, down from 1.4 percent in May. But CoreLogic's monthly figures aren't adjusted for seasonal patterns, such as warmer spring weather.

The slowing price gains should make buying a house more affordable. Prices had risen sharply last year, along with mortgage rates. At the same time, Americans' paychecks haven't risen nearly as fast, having increased roughly 2 percent a year since the recession ended -- about the same pace as inflation. Many would-be buyers, particularly younger ones, were priced out of the market as a result.

Sales of previously owned homes fell in the second half of last year and have only modestly recovered since then. They rose to a seasonally adjusted annual rate of 5.04 million in June, the third straight increase. But that was still 2.3 percent fewer than the pace a year earlier.

Overall, prices rose in 98 of the 100 largest cities tracked by CoreLogic from a year earlier. They fell in Worcester, Mass. and in Little Rock.

Service industries in the U.S. expanded in July at the fastest pace since December 2005, showing the economy was building more momentum at the start of the second half of 2014.

The Institute for Supply Management's nonmanufacturing index increased to 58.7 from June's 56, the Tempe, Ariz.-based group said Tuesday. A reading greater than 50 shows expansion. The median estimate in a Bloomberg survey of economists was 56.5. A measure of orders climbed to an almost 9-year high.

The pickup among service providers, combined with the strongest rate of growth in more than three years at American factories, shows the world's largest economy was strengthening at the start of the third quarter. Faster payroll growth is helping fuel consumer demand, raising the odds that a self- reinforcing cycle of increased hiring and spending is under way.

"The services part of the economy looks to be just fine," said Stan Shipley, an economist at International Strategy & Investment Group in New York. "We're on a trajectory of roughly 3 percent GDP growth." To see that, "you need the housing sector to kick in, and we think you're going to start to see that."

Information for this article was contributed by Josh Boak and Christopher S. Rugaber of The Associated Press and Michelle Jamrisko and Chris Middleton of Bloomberg News.

Business on 08/06/2014

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