Factory orders up slightly

Orders for manufactured goods posted a surprisingly strong increase in April as demand rose in a number of areas, including heavy machinery, iron and steel.

The Commerce Department reported Tuesday that orders were up 1.1 percent in April following a 1.5 percent increase in March. Those gains followed big declines in January and March that raised concerns about how much pain manufacturers would feel from the severe economic slowdown hitting housing and the financial sector.

Orders in the battered auto industry and commercial aircraft sector fell in April, but other areas showed strength, catching analysts by surprise.

They had been forecasting that overall orders would edge down slightly in April.

The report on manufactured goods followed news Monday that a key manufacturing gauge rose to a reading of 49.6 in May, up from 48.6 in April.

The Institute for Supply Management's manufacturing index remained at levels indicating a continued contraction, but the upward movement was seen as a possible sign that manufacturing was stabilizing.

Manufacturing is being buffeted by a prolonged slump in housing, which has cut into demand for building supplies, and soaring energy prices, which have hurt auto sales.

However, these adverse factors are offset by continued strong demand for U.S. exports.

Michelle Girard, an analyst at RBS Greenwich Capital, said one hopeful sign was that inventories of unsold goods were unchanged in April, indicating manufacturers are keeping inventory backlogs under control.