August 5, 2004 -- In another sign that the manufacturing sector should continue to experience strong demand, new orders at U.S. factories rose by more than expected in June, according to a report from the Commerce Department.

Factory orders increased 0.7 percent in June and May's numbers were revised to show a 0.4 percent gain after an initial report of a 0.3 percent decline. June's orders exceeded Wall Street's forecast of a 0.5 percent increase.

The report was the second this week that points to a strengthening manufacturing sector. On Monday, the Institute for Supply Management reported that manufacturing grew for the 14th consecutive month in July. The ISM manufacturing index rose to 62.0 in July, up from 61.1 in June. A reading above 50 indicates the sector is expanding.

The strong factory order numbers also lent support to the belief that Tuesday's consumer spending report was just a small bump in the road. Spending fell 0.7 percent in June after a 1.0 percent increase in May.

Factory orders for durable goods, or those meant to last three years or longer, increased 0.9 percent in June, an improvement over the 0.7 percent gain reported in an advanced report issued last week.

Non-durable goods improved by 0.5 percent in June. May's number was revised to 2.0 percent, up from an initial report of a 1.5 percent gain.

Inventories rose 0.7 percent in June, matching the increase in May. Shipments also rose 0.7 percent, meaning that the inventory-to-shipment ratio remained unchanged for the third straight month.