Transportation buoys U.S. factory orders in October

WASHINGTON, Dec 3 (Reuters) - - New orders for U.S. factory goods rebounded in October after two straight months of declines, but manufacturing remains crippled by a strong dollar and spending cuts in the energy sector.

An Airbus A321 is being assembled in the final assembly line hangar at the Airbus REUTERS/Michael Spooneybarger

The Commerce Department said on Thursday new orders for manufactured goods increased 1.5 percent on rising demand for transportation equipment and a range of other goods. Orders in September were revised to show them falling 0.8 percent instead of the previously reported 1.0 percent drop.

Despite the increase in orders last month, manufacturing remains mired in weakness, with a survey this week showing the sector contracting last month for the first time in three years.

Factory activity, which accounts for about 12 percent of the economy, is also being undermined by business efforts to reduce an inventory overhang and tepid global demand.

Economists polled by Reuters had forecast factory orders rising 1.4 percent in October. The dollar has gained 18.6 percent against the currencies of the United States’ main trading partners since June 2014, which has eroded export growth and undercut the profits of multinationals.

In October, orders for transportation equipment increased 7.9 percent, largely reflecting a rise in aircraft orders. They had declined 2.2 percent in September. Motor vehicle orders fell 2.0 percent.

The Commerce Department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans – rose 1.3 percent as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, fell 0.5 percent in October instead of the 0.4 percent drop reported last month.

Inventories of factory goods dipped 0.1 percent, dropping for a fourth straight month. That left the inventories-to-shipments ratio unchanged at a still lofty 1.35, a sign that the inventory drawdown could extend through the fourth quarter.

Unfilled orders at factories rose 0.3 percent, after two consecutive months of declines. Shipments fell 0.5 percent. They have dropped in six of the last seven months.

Reporting By Lucia Mutikani; Editing by Andrea Ricci; 1 202 898 8315; Reuters Messaging: