WASHINGTON U.S. factories saw a surprisingly hefty increase in their orders for big-ticket products in July, reflecting continued strength in export sales and a boost to business investment from the government's tax-stimulus package.
Economists, however, remain worried that spreading economic weakness overseas and a rebound in the value of the dollar could spell an end to the export boom later this year.
The Commerce Department said Wednesday that orders for durable goods rose 1.3 percent last month, far above the slight 0.1 percent increase Wall Street had been expecting.
The July increase matched a 1.3 percent rise in June, which was revised up from an earlier reading of 0.8 percent. The matching gains were the strongest since orders for durable goods, items expected to last at least three years, jumped by 4.1 percent in December.
Wall Street investors were encouraged by the better-than-expected gain in durable goods orders. The Dow Jones industrial average rose 89.64 points to close at 11,502.51.
A huge rebound in orders for commercial aircraft, which had fallen sharply in June, led last month's strength. But even outside the volatile aircraft category, there was widespread growth, indicating that American companies are continuing to benefit from a boom in exports, due mainly to the decline in the value of the dollar earlier this year.
"These upbeat capital goods numbers amid a downtrodden U.S. consumer sector indicate how helpful a weak dollar is in the current cycle," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, an industry trade group.
But some economists expressed concerns over how much longer the export boom can last, given spreading economic weakness in Europe, Japan and other major overseas markets. They noted that the dollar, which had been on a long slide, has come off its recent lows, which could translate into less of a price advantage for U.S. exporters.
"The recent downturn in growth abroad and stabilization of the dollar could put pressure on capital-goods spending in the months ahead," said Zach Pandl, an economist at Lehman Brothers.
Other analysts were impressed with the staying-power demonstrated in the new orders figures for June and July, and some said it showed the boost manufacturers are getting from increased demand by businesses hiking their investment spending to take advantage of $51 billion in business tax breaks included in the $168 billion economic-stimulus package passed by Congress in February.
The government will release its revised estimate for economic growth in the April-June quarter on Thursday, and economists said they were revising upward their estimates for both second quarter and third quarter gross domestic product growth, based on the better-than-expected orders numbers. GDP measures the value of all goods and services produced within the U.S. and is the broadest barometer of the country's economic health.
David Wyss, chief economist at Standard & Poor's in New York, said he believed the current estimate of 1.9 percent GDP growth for the second quarter will be boosted to between 2.5 percent and 3 percent, while growth in the current quarter will be around 1.7 percent.
"Exports are holding up a lot better than we thought they would with the weakness in Europe and Japan, and we are seeing the impact of the stimulus package on business investment decisions," he said.