September factory orders up 4.8%

WASHINGTON — U.S. companies increased their orders for manufactured goods by the largest amount in 18 months in September, but companies remained cautious in ordering goods that signal plans to expand and modernize.

Factory orders rose 4.8 percent in September compared with August, a month when orders had fallen 5.1 percent, the Commerce Department said Friday.

The September gain was the biggest since March 2011and was driven by a surge in demand for commercial aircraft, a volatile category which had seen orders plunge in August.

Companies from Caterpillar Inc. to General Electric Co. have cut forecasts, a reminder that business investment will no longer bolster the world’s largest economy as it did earlier in the recovery. The outlook for manufacturers may remain dim as overseas demand cools and concern mounts that the so called fiscal cliff may not get averted by the end of 2012.

“We’re likely to be in a holding pattern in the next few months,” Millan Mulraine, senior U.S. strategist for TD Securities in New York, said before the report. “Manufacturing will stall out as it is going to follow spending, both globally and domestically.”

Demand for core capital goods, viewed as a good proxy for business investment plans, edged up a slight 0.2 percent in September after a 0.3 percent rise in August. The two modest gains came after two months of huge declines as business investment remains weak.

Businesses have grown more cautious for a number of reasons. Many are concerned about the economic outlook overseas. Europe’s financial crisis has pushed many countries in the region into recession. That has cut into U.S. exports and corporate profits. Growth has also slowed in China, Brazil and other big developing nations which are major markets for American exports.

Companies are also hesitant to commit the money to major expansion and modernization projects without knowing whether large tax increases and big government spending cuts will take effect in January should Congress fail to reach a budget deal to avert them.

The report on factory orders covers durable goods, items expected to last at least three years, and nondurable goods such as chemicals, paper and food.

Orders for durable goods jumped 9.8 percent, a slight downward revision from a preliminary report showing a 9.9 percent increase but still the largest in nearly three years.

Aircraft orders surged 2,650 percent after a 97.2 percent drop in August. Orders for primary metals such as steel rose 3.9 percent while demand for machinery was up 9.2 percent. Orders for nondurable goods rose 1 percent in September after a 2.2 percent gain in August.

Information for this article was contributed by Shobhana Chandra of Bloomberg News.