Feb. 2 (Bloomberg) -- Orders placed with U.S. factories rose more than forecast in December on higher demand for business equipment, motor vehicles and aircraft, a sign manufacturing may weather its current slump.

The 2.4 percent increase followed a revised 1.2 percent increase in November that was more than previously reported, the Commerce Department said in Washington. Excluding transportation equipment such as Boeing Co. jets, bookings rose 2.2 percent after falling 0.4 percent.

Rising orders signal that manufacturers may expand production in early 2007 after automakers and other goods producers slashed inventories, detracting from growth at the end of 2006. The Federal Reserve this week said it saw signs of ``firmer'' economic growth.

``We're looking at a manufacturing sector that is a little better off than it was a few months ago,'' Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut, said before the report. ``A re-acceleration in consumer spending in the fourth quarter helped firms pare unwanted stocks.''

Economists had forecast a 1.9 percent increase in factory orders in December after a previously reported 0.9 percent gain the month before, according to the median of 58 estimates in a Bloomberg News survey. Estimates of the increase ranged from 0.7 percent to 4.0 percent.

Payroll Report

A separate report earlier today from the Labor Department showed employers added 111,000 non-farm jobs in January, compared with 206,000 in December. The unemployment rate rose to 4.6 percent from 4.5 percent.

Orders for durable goods, which make up about 55 percent of factory demand, rose a revised 2.9 percent after a 2.2 percent gain in November. The government last month reported a 3.1 percent gain in durables orders for December.

Civilian aircraft orders increased 28.1 percent, after rising 4.2 percent in November. Orders at Boeing Co., the world's second-biggest commercial airplane maker, increased to 217 in December, from 58 the month before.

Orders for computers and electronic products rose 2.1 percent after an 8 percent gain. Bookings for automobiles rose 6.4 percent, after rising 2.2 percent.

Auto Sales

Asian automakers such as Japan's Toyota Motor Corp. have steadily increased sales. Toyota's U.S. sales surged 13 percent last year to 2.54 million vehicles, pushing its market share to a record 15.4 percent from 13.3 percent a year earlier. Toyota overtook DaimlerChrysler AG for third place in U.S. sales behind General Motors Corp. and Ford Motor Co.

Today's report also showed that construction machinery bookings rose 2.8 percent after dropping 22 percent in November. The government reported Jan. 31 that construction spending fell in December as homebuilding declined by the most in four months.

Orders for electrical equipment and appliances fell 1.6 percent after declining 2.7 percent. Orders for computers rose 0.7 percent after surging 61 percent the prior month. .

Bookings for non-durable goods, reported today for the first time, rose 1.8 percent in December after rising 0.1 percent in November.

Orders for capital goods excluding aircraft and military equipment, a sign of future business investment, rose 3.1 percent after falling 1 percent. Shipments of these goods, which the government uses to calculate figures on gross domestic product, fell 0.1 percent after rising 2.1 percent.

Spending on equipment and software fell 1.8 percent in the fourth quarter, subtracting 0.1 percentage point from economic growth, after rising at a 7.7 percent pace in the prior three months, the government said Jan. 31 in its report on gross domestic product.

Factory Inventories

Factory inventories rose 0.1 percent in December. The inventory-to-shipments ratio fell to 1.22 months from 1.23 months.

The economy grew at a better-than-forecast annual rate of 3.5 percent in the fourth quarter, according to the government's preliminary estimate. That compares with a 2 percent pace in the third quarter which was the slowest last year.

The Institute for Supply Management's index of manufacturing activity in January contracted to its lowest since April 2003, as factories cut production and reined in orders to trim bloated inventories, the Tempe, Arizona-based institute said yesterday. The inventory gauge slumped to its lowest since February 2002, signaling stronger output going forward. The factory index has averaged 50.5 in the last four months.

``It's obvious a lot of people have gotten the message that they need to change their inventory policy and have gone from a subtle liquidation to a very strong liquidation,'' Norbert Ore, chairman of the ISM's business survey committee, said on a conference call with the media. ``All in all it's consistent with what we've seen: a deceleration in 2006 and now a flattening out in the last four months.''

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: February 2, 2007 10:00 EST