WASHINGTON (AP) — Orders to U.S. companies rose in July, reflecting a surge in demand for autos and commercial aircraft. But in a troubling sign of manufacturing weakness, a key orders category that tracks business investment plans fell by the largest amount in eight months.
Factory orders rose 2.8 percent in July, the biggest overall advance in a year, reflecting sizable gains in demand for motor vehicles and airplanes, the Commerce Department said Friday. But core capital goods orders, viewed as a good proxy for investment spending, plunged 4 percent, the fourth setback in the past five months.
The worry is that businesses have begun to scale back their plans to expand and modernize in the face of spreading economic weakness in Europe and such major U.S. export markets as China, Brazil and India.
Europe's financial crisis has pushed many countries in that region into recession, a development that threatens exports of U.S. goods.
Economists are also worried that companies are already postponing plans to buy new equipment and hire new workers because of the uncertainty over how the federal budget deadlock will be resolved, a development that would represent another blow for an already weak recovery.
The government reported Wednesday that the overall economy grew at an annual rate of 1.7 percent in the April-June quarter. While that was slightly better than the initial estimate of growth at 1.5 percent in the second quarter, it was still far below the pace needed to make a significant dent in the unemployment rate.