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Soaring Demand for Aircraft Lifts Overall Factory Orders While Manufacturing Index Hits Highest Level in 2 Years

Factory orders increased 1.7 percent in September from August according to the U.S. Department of Commerce. That followed a 0.1 percent decline in August and a 2.8 percent plunge in July.

The September gain was driven by a 57.7 percent jump in demand for aircraft.

However, core capital goods, which include machinery, fell 1.3 percent in September. And demand for machinery plummeted 23.6 percent, with big declines in construction machinery, electric turbines and generators.

Economists pay close attention to core capital goods. They are viewed as a better gauge of companies' plans to invest because they exclude more volatile orders for aircraft and defense equipment. The decline was the second in three months and points to weaker activity at factories in the July-September quarter.

Orders for durable goods, items expected to last at least three years, increased 3.8 percent in September, largely on the airplane gains. The big rise in demand for aircraft helped offset a 0.7 percent dip in demand for autos and auto parts. That decline is expected to be temporary given the strength in auto sales this year.

Recent manufacturing reports have been mixed.

A closely watched survey of U.S. purchasing managers said manufacturing expanded in October at the fastest pace in 2 1/2 years. The Institute for Supply Management's manufacturing survey increased for the fifth straight month, reaching 56.4, its highest level since April 2011, suggesting the 16-day partial shutdown of the government had little effect on manufacturers. Gains appeared to be driven by overseas growth, healthy U.S. auto sales and the housing recovery.

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U.S. Dept of Commerce

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