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Factory Orders, Jobless Claims Rise Less Than Expected

Reuters
Thursday, 2 Aug 2007 | 10:16 AM ET

New orders at U.S. factories rose less than expected in June while jobless claims edged higher last week, government data released on Thursday showed, but neither report gained traction in wary financial markets.

Factory orders increased 0.6 percent in June and fell somewhat once the volatile transportation component was excluded. Analysts polled by Reuters expected orders to climb 1.0 percent in June from an unrevised 0.5 percent fall in May.

Economists said the data indicated the sector remains in good shape -- important because manufacturing has helped to offset weakness in the U.S. housing market. However, the report gained little attention from investors who remained focused on problems in credit and subprime mortgage markets.

"I don't think factory orders is what people see as driving the market. The story is about credit markets and the related markets," said Bill Hornbarger, chief fixed-income strategist at A.G. Edwards & Sons in St. Louis.

Economic Data
Breaking down the weekly jobless claims report, with Mark Hawkinson, FIMAT USA-Cube Division senior vice president; CNBC's Rick Santelli, Steve Liesman and Carl Quintanilla

U.S. stocks were slightly higher with the Dow Jones Industrial Average advancing around 14 points to 13,375 in watchful trade following several volatile sessions dominated by worries about the availability of credit.

June nondefense capital goods orders excluding aircraft, viewed as a good proxy for business spending, were unchanged, which was slightly better than a 0.7 percent decline seen in an earlier estimate by the government last week.

"The best thing about the report is that the core reading, nondefense capital orders, was revised higher. This suggests a slightly upward revision, about a tenth of percentage point, to second-quarter GDP," said Michelle Meyer, an economist with Lehman Brothers in New York.

The U.S. economy grew at a 3.4 percent annualized pace in April to June, according to an initial government estimate, up from a 0.6 percent rate in the first quarter.

Excluding transportation, factory orders declined 0.5 percent, the first outright fall since January when they shrank 2.5 percent. The category's June performance was hurt by a 3.6 percent drop in orders for computers and electronic products and a 6.1 percent fall in primary metals.

Strong Jobs

The other main economic release on Thursday was from the U.S. Labor Department, whose data showed new applications for jobless benefits rose a slim 4,000 last week to a still-low 307,000. That signaled a healthy jobs market ahead of the monthly employment report due on Friday.

"Initial claims remain low, continuing to suggest low levels of job loss; continuing claims edge down but remain relatively high by standards of latest few months," Goldman Sachs' economists said in a note to clients.

Wall Street economists polled by Reuters ahead of the report were expecting a reading of 310,000 after an originally reported 301,000 in the prior week. The department revised up the prior week's figure to 303,000.

Continuing claims for people who already qualify for benefits and remain on the jobless rolls fell by 16,000 to 2.53 million for the week ended July 21, the most recent period these figures were available.

July's U.S. employment report is scheduled for release at 8.30 a.m. on Friday. Analysts polled by Reuters forecast 130,000 new jobs were created in the month, for a pace almost matching the 132,000 new jobs in June.

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