WASHINGTON - NEW orders for long-lasting US manufactured goods jumped a surprising 1.3 per cent in July as businesses ramped up spending plans and demand for a wide array of items rose, a government report showed on Wednesday.

Strong demand for manufactured goods may ease some concerns about sagging US economic growth amid slowing consumer spending and the long-slumping housing market.

However, analysts fear a strengthening dollar and slowing economies overseas could diminish foreign demand for US products, which has helped keep the economy afloat this year.

Orders for durable goods, items meant to last three years or more, were up after an upwardly revised 1.3 per cent gain in June, previously reported as a 0.8 per cent rise, the Commerce Department said. Analysts were expecting durable goods orders to remain unchanged from the previous month.

US Treasury debt prices fell as the report suggested resilience despite the deep housing correction and credit crunch.

The Dow Jones industrial average was up about 0.7 per cent, mainly on the strong economic data, but the dollar slipped against the euro as investors trimmed back dollar holdings after its huge gains in recent weeks.

Robust manufacturing could strengthen the argument of some Federal Reserve officials who have called for higher interest rates to combat inflation.

The Fed has held interest rates steady at 2 per cent since April despite persistently high inflation as a consensus has prevailed that low rates are necessary to counter soft labour markets and lingering financial turmoil.

At the same time, some analysts worry the economy could hit an air pocket in the second half of the year after being pushed ahead at a reasonable clip in the second quarter by government stimulus checks.

'Most of the increase in capital spending implied by these data is being undertaken by companies benefiting from the export boom; the domestic economy remains very weak indeed,' Mr Shepherdson said.

Transportation orders rose 3.1 per cent in July, the largest gain since February, on a 28 per cent rise in civilian aircraft orders.

Orders for machinery and primary and fabricated metals rose, while demand for computers and appliances waned.

Even when volatile transportation orders were stripped out, demand for durables rose 0.7 per cent. Analysts had expected a 0.5 per cent drop in durables orders excluding transportation.

Non-defence capital goods orders excluding aircraft, seen as a barometer of business spending, jumped 2.6 per cent, the steepest gain since April. Analysts were expecting that category to decline by 0.1 per cent.

In a glimmer of hope for downtrodden housing markets, mortgage applications rose for the first time in three weeks as interest rates for 30-year fixed-rate mortgages, the most common type of home loan, dipped to an average of 6.44 per cent from the previous week. -- REUTERS