The nation's manufacturers enjoyed a 1.3 percent increase in factory orders for new goods in July, the biggest jump this year, the Commerce Department reported yesterday.
But the increase was concentrated in aircraft and related parts, with many industries not sharing in the gain. And factory inventories also rose substantially during the month as shipments fell for the first time in more than a year, the report said.
In a separate report, the government said that construction spending dropped at an annual rate of 1 1/2 percent in July as builders watch hopes evaporate for a break in high interest rates the rest of the year.
Orders for durable goods -- cars, furniture and other items expected to last at least three years -- accounted for the entire gain in factory orders, rising 2 1/2 percent, while orders for nondurables were virtually unchanged, the first report said.
Without the jump in aircraft and parts, which the report described as "highly volatile month to month," orders for durable goods would have increased only 0.2 percent and overall orders even less.
While new orders rose 1.3 percent to a seasonally adjusted $173.1 billion in July for the biggest gain since last December's 2.4 percent, shipments of manufactured goods dropped 0.7 percent to $170.3 billion for the first monthly drop in shipments since May 1980, the report said.
The entire $1.3 billion shipment decline was accounted for by the automotive industry.
The decline in shipments sent manufacturers' inventories rising 0.9 percent to a book value of $272.2 billion and raised their inventories-to-shipments ratio to 1.6 from 1.57 in June, the report said.
Factory operators like to keep that number low, and high inventory levels can mean production cuts, layoffs and a general weakening in the national economy.
The report said "nearly all industries reported increases, although petroleum inventories declined 3.8 percent."
Among the industries recording increases in their inventories in July were primary metals, nonferrous metals and shipbuilding, as well as aircraft and parts. Declines were shown for both electrical and nonelectrical machinery, as well as for the automotive industry.
In the second report, the Commerce Department's Bureau of the Census said that new construction during July was estimated to be put in place at what would be an annual rate of $235.1 billion, after seasonal adjustment.
June's figures were revised to show the drop from May had been 0.4 percent, instead of the 1 1/2 percent decline originally reported.
"July marked the sixth consecutive month of declining real construction activity," Commerce Secretary Malcolm Baldrige said in a statement released with the figures. "A decline in overall construction appears likely to continue at least into the fall, and no major pickup is in sight this year."
But Baldrige sees improvement for next year. "The industry will begin to benefit directly from such provisions in the new tax bill as savings incentives, faster depreciation for buildings, lower tax rates for small businesses and larger investment tax credits for rehabilitation of buildings," he said.
The value of residential construction, measured alone for July, was down 0.9 percent, single-family-house construction was down 4.16 percent at an annual rate and multi-unit, private-building construction was down 9.7 percent.
Nonresidential construction, including office buildings, declined 1.4 percent at an annual rate. Public construction dropped 3 percent at an annual rate, and highway and street construction was down 6.7 percent.
At about this time last year, the imposition of credit controls had provided a brief respite from high interest rates, according to industry analyst Bill Young of the National Association of Home Builders.
However, the chance of even a short break this year in the high interest rates that discourage both builders and buyers seems to be vanishing, according to Young. The Federal Reserve Board's stated intentions to keep money tight and the government's growing borrowing needs seem to rule out any relief, he said.
"There's going to be less money in the fourth quarter, and the federal government is going to be borrowing more of it," Young said.
On Monday, government figures showed that sales of new single-family houses were running at what would be an annual rate of 420,000 units during July, a 2.4 percent improvement over June but still 34.4 percent below the rate of sales of July 1980.