Oct. 4, 2005--Increased demand for a variety of goods in August, along with a renewed boom in housing and record-high construction spending, pushed new factory orders up by 2.5% in the weeks ahead of Hurricane Katrina and Rita, the Commerce Department reported this week.

Though the two devastating storms have since put a damper on consumer confidence and depressed short-term forecasts, the Institute of Supply Management reported on Monday that U.S. manufacturers might have already recaptured some of that earlier momentum, sharing the more buoyant outlook of CEOs and small business owners in recent months.

New factory orders rose by $9.7 billion to $395.2 billion in August, the Commerce Department said Tuesday. The increase, the third in four months, reflects higher demand for both durable goods, up 3.4%, and non-durable goods, up 1.6%. The figure for durable goods, those expected to last three years or more, was revised upward from an earlier estimate of 3.3% issued last week.

Orders for transportation equipment, the largest increase, were up 3.1% to $58.7 billion, the fifth increase over the last six months. Durable goods outside transportation rose 4.2%.

Also up were shipments of manufactured goods, which increased $3.8 billion, or 1.8%, for durable goods, and $2.8 billion, or 1.6%, for non-durable goods, according to the report.

The inventory-to-sales ratio, which gauges the rate stocks would be depleted at the current shipment pace, fell to 1.18 months, from 1.20 in July.

At the same time, construction spending climbed by 0.4% to a record high $1.11 trillion in August, the department reported, marking the highest increase in three months. After showing no change in July, residential construction picked up by 0.2%. Also up was nonresidential construction spending, by 0.8%, the biggest increase since March.

The figures show construction is "strong, but is no longer soaring," according to Ian Shepherdson, chief U.S. economist with High Frequency Economics, a New York-based economic analysis firm. Activity will likely return in the fourth quarter and beyond as post-Katrina rebuilding gets underway, Shepherdson said.

Showing signs that's already started, factory activity last month soared to 59.4% from 53.6% the previous month, the Institute for Supply Management reported Monday.

According to the monthly ISM index, which surveys purchasing and supply executives in over 400 industrial companies, economic activity in the manufacturing sector grew in September for the 28th consecutive month.

Reporting continued growth last month were the paper, wood and wood products, electronic components and equipment, apparel and tobacco industries, among others.

""While energy prices and the impact from Hurricane Katrina are major concerns, the manufacturing sector has regained significant momentum," ISM chairman Norbert J. Ore said in a statement.