By Timothy R. Homan
Sept. 3 (Bloomberg) -- Factory orders in the U.S. probably increased in July, reflecting overseas demand and a rise in oil prices that kept refineries busy, economists said before a report today.
Orders advanced 1 percent after a 1.7 percent gain in June, according to the median forecast in a Bloomberg News survey of 59 economists ahead of the Commerce Department's report.
Energy prices have receded since mid-July, with the price of crude oil down 25 percent from its record on July 11, and exports may also slow after economies in Japan and Europe started shrinking. The Organization for Economic Cooperation and Development said yesterday both the euro region and Japan will expand more slowly than the U.S. this year.
``Manufacturing's treading water, but more challenging times are on the horizon,'' said Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania. ``The key support from trade is going to fade as the downturn in the global economy continues to play out.''
The Commerce Department's report is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 0.1 percent to an increase of 1.7 percent.
U.S. job cuts surged 12 percent last month from a year earlier as rising layoffs at automakers and the government overwhelmed a reduction in losses at financial firms, according to a report by a private placement firm.
Job Cuts
Firing announcements increased to 88,736 last month from 79,459 in August 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.
Orders for durable goods, which comprise about half of factory orders, rose 1.3 percent in July, matching the previous month's gain, Commerce Department figures showed last week. Excluding transportation equipment, orders rose 0.7 percent after a 2.4 percent increase in June.
A private report yesterday showed U.S. manufacturing shrank in August for the first time in three months as companies cut back on production and trimmed payrolls to offset weakening consumer spending. The Institute for Supply Management's factory index slipped to 49.9 from 50 in July. Fifty is the dividing line between expansion and contraction.
Meanwhile, Commerce Department data showed that construction spending fell more than forecast in July as activity slowed at power plants and factories. Private residential construction projects declined to the lowest level since March 2001, when the country slipped into the start of the last recession.
Export Boost
Overseas demand has helped the U.S. avoid a deeper economic downturn so far. The American trade deficit narrowed to a $376.6 billion annual pace in the second quarter, the smallest gap in eight years. Excluding trade, the economy would have expanded at a 0.2 percent pace from April through June, instead of the overall 3.3 percent annualized increase.
Federal Reserve staff economists are among those anticipating that growth will weaken from last quarter's pace. They ``marked down'' the central bank's forecast for the second half of 2008 and for 2009, according to minutes of the Federal Open Market Committee's Aug. 5 meeting released last week. Fed policy makers also judged that recent reports pointed to ``softer'' demand for U.S. exports.
The Fed's regional report on the U.S. economy, called the Beige Book, is scheduled to be released today at 2 p.m. in Washington.
Business spending on new equipment and software dropped at a 3.2 percent annual pace last quarter, the second consecutive decline, the government said last week.
Dell Inc., the world's second-biggest personal-computer maker, plunged the most since September 2001 in Nasdaq trading last week after saying the U.S. slump in technology spending is spreading abroad.
The Round Rock, Texas-based company's second-quarter sales to commercial clients in Asia grew at a slower pace than the previous three months, as did sales to corporate customers in Europe, the Middle East and Africa.
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Factory
Orders
MOM%
====================================
Date of Release 09/03
Observation Period Jan.
------------------------------------
Median 1.0%
Average 1.0%
High Forecast 1.7%
Low Forecast -0.1%
Number of Participants 63
Previous 1.7%
------------------------------------
4CAST Ltd. 1.1%
Action Economics 1.0%
Aletti Gestielle SGR 1.5%
Argus Research Corp. 1.7%
Banc of America Securitie 0.5%
Bank of Tokyo- Mitsubishi 0.8%
Bantleon Bank AG 0.7%
Barclays Capital 1.4%
BBVA 0.8%
BMO Capital Markets 0.7%
BNP Paribas -0.1%
Briefing.com 0.5%
CIBC World Markets 1.3%
ClearView Economics 1.2%
Commerzbank AG 0.0%
Credit Suisse 1.5%
Daiwa Securities America 0.3%
DekaBank 1.0%
Desjardins Group 1.5%
Deutsche Postbank AG 1.0%
Dresdner Kleinwort 1.7%
DZ Bank 0.5%
First Trust Advisors 0.5%
Goldman, Sachs & Co. 0.9%
H&R Block Financial Advis 0.5%
Helaba 1.0%
High Frequency Economics 1.0%
HSBC Markets 0.8%
IDEAglobal 0.5%
Informa Global Markets 0.8%
ING Financial Markets 1.1%
Insight Economics 1.2%
J.P. Morgan Chase 1.5%
Janney Montgomery Scott L 1.3%
JPMorgan Private Client 1.0%
Landesbank BW 1.0%
Lehman Brothers 0.9%
Lloyds TSB 0.7%
Maria Fiorini Ramirez Inc 0.5%
Merk Investments 1.0%
Merrill Lynch 1.0%
MFC Global Investment Man 1.0%
Moody's Economy.com 0.5%
Morgan Stanley & Co. 1.2%
National City Corporation 0.6%
Newedge 0.7%
Nomura Securities Intl. 0.6%
Nord/LB 1.0%
PNC Bank 1.2%
RBS Greenwich Capital 0.9%
Ried, Thunberg & Co. 0.5%
Schneider Trading Associa 1.2%
Scotia Capital 1.7%
Societe Generale 1.0%
Stone & McCarthy Research 1.7%
Thomson Financial/IFR 1.6%
Tullett Prebon 1.0%
University of Maryland 1.1%
Wachovia Corp. 1.0%
Wells Fargo & Co. 1.0%
WestLB AG 1.0%
Westpac Banking Co. 1.1%
Wrightson Associates 0.5%
====================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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