US Economy Boosted By Rise in Manufacturing Orders

Fears of a slowdown in the US economy today eased as factories reported a jump in orders for costly manufactured goods during July.

The US commerce department said orders for durable goods - expensive items such as aircraft - rose by 1.7% in July from the previous month, the biggest gain for four months.

The larger than expected increase, coupled with an upward revision for June to 1.1% from 0.9%, should ease White House concern after some poor unemployment data.

Alan Greenspan, the chairman of the Federal Reserve, last month admitted the US economy had hit a "soft patch" in June, mainly due to higher energy prices.

The Fed raised interest rates from historic lows to 1.5% earlier this month to stay ahead of inflation on the assumption that growth would pick up again.

"Today's figures were much better than expected by the markets and, although one has to keep in mind that monthly figures are volatile, they may point to an improvement in the US economy after a relatively weak second quarter of 2004," Andrij Halushka, an economist with the Centre for Economics and Business Research, said.

July's figures were given a lift by a 100% increase in orders for civilian aircraft, including a reported jump orders at the aerospace giant Boeing.

The increase meant total transport orders rose by 5.6%, even though orders for motor vehicles (-5.3%) and defence aircraft (-38%) fell.

However, the White House will be concerned that, if transport is set aside, orders for other goods nudged up by just 0.1%, although that was an improvement from the 0.3% decline in June.

The US president, George Bush, is counting on the economy to pick up by the time voters go to the polls in November. He has been criticised for the inability of the US economy to generate plentiful jobs despite strong growth.

The US created only 32,000 jobs in July, compared with a Wall Street forecast of a 220,000 gain. That figure, combined with a downward revision of 50,000 to the jobs numbers of the previous two months, means Mr Bush needs almost 250,000 new jobs a month between now and the end of the year to replace those lost since he took power in 2000.

Otherwise, he will be the first president since the much-derided Herbert Hoover, also a Republican, to preside over a net loss of jobs during a four-year term.