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US factory orders surged in June for transportation equipment, other goods

Factory orders advanced 1.8 percent in the month, the Commerce Department reported Tuesday.

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    A 787 Dreamliner being built for Air India is pictured at South Carolina Boeing final assembly building in North Charleston, South Carolina, in 2013. New orders for US factory goods rebounded strongly in June on robust demand for transportation equipment and other goods, a hopeful sign for the struggling manufacturing sector. Orders for transportation equipment surged 9.3 percent in June, reflecting a 65.4 percent jump in aircraft bookings.
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Orders to U.S. factories increased in June, and a key category that reflects business investment plans posted a modest rise. But the gains weren't robust enough to suggest that the sluggish manufacturing sector is mounting a significant turnaround.

Factory orders advanced 1.8 percent in the month, the Commerce Department reported Tuesday. The jump, however, was fueled by a surge in demand for commercial aircraft, a volatile sector that can swing widely from month to month.

Meanwhile, a key category that serves as a proxy for business investment plans edged up 0.7 percent after declines in April and June. For the first half of the year, this category is down 3.5 percent from the same period a year ago and has dragged overall economic growth.

Manufacturing has been held back this year by a rising dollar and falling oil prices. The higher value of the dollar against foreign currencies makes U.S. goods more expensive and less competitive in major export markets. The lower oil prices have led energy companies to scale back their investment plans.

The government reported last week that the overall economy as measured by the gross domestic product grew at a 2.3 percent annual rate in the April-June quarter, an improvement from a slight 0.6 percent GDP increase in the first quarter. The rebound was powered by consumer spending.

But business investment contracted at an annual rate of 0.6 percent in the second quarter, reflecting big declines in equipment spending by various industries and a 68.2 percent plunge in the category that covers oil and gas exploration and drilling activities.

Economists are hopeful that overall economic growth will revive further to around 3 percent in the second half of the year as continued gains in employment bolster consumer spending. They expect strength in the consumer sector will be enough to offset weakness in manufacturing.

Demand for durable goods, items expected to last at least three years, increased 3.4 percent in June, matching the estimate made last week in a preliminary report. Orders for nondurable goods such as chemicals, paper and clothing, rose 0.4 percent after no increase in May.

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