CHICAGO -- The 0.5 percent rise in U.S. factory orders in February reflects a manufacturing sector tiptoeing its way through a tenuous economic recovery, economists said.
Frederick Sturm, an economist for Fuji Securities Inc. in Chicago, said the factory orders report showed that the economic recovery is gradually gaining momentum.
"Chalk this statistic up to one more score that the economy is taking off," said Mr. Sturm, noting that "it's not going to be a barnstormer, but rather a low-calorie recovery."
February's gain to a seasonally adjusted $236.4 billion was fueled primarily by a 1.4 percent jump in orders for non-durable goods. January factory orders climbed a revised 0.5 percent.
Overall, durable-goods orders fell a revised 0.3 percent in February, to a seasonally adjusted $120.2 billion, compared with the 0.1 percent decline originally reported.
Neal Soss, chief economist at First Boston Corp. in New York, said that although the rise in factory orders was "unspectacular," the data still showed the economy is growing modestly.
The trend should continue, but no big increases in factory orders are expected in the months ahead, he said. Defense orders will remain weak, he said, calling the declines an "ongoing policy matter."
New orders for defense products fell 19.2 percent in February, while orders for defense capital goods declined 18.7 percent.Excluding defense, factory orders rose 1.2 percent in February.
Economists noted the decrease in inventories, the fifth consecutive monthly decline, as a bright spot in the report.
Fueling the 0.5 percent fall in durables inventories was weakness in industrial machinery and equipment, transportation equipment and fabricated metals. Inventories of non-durable goods were flat in February, compared with January's 0.2 percent decline.
The low inventories, coupled with a decline in unfilled orders, indicate that nothing is in the pipeline to give manufacturers an incentive to continue producing at current levels, said Donald Ratajczak, director of the Economic Forecasting Center at Georgia State University.
Mr. Sturm said the factory sector is "not out of the woods" until manufacturers start feeling comfortable increasing inventories.