A GAUGE of U.S. business investment plans rebounded solidly in June after two straight months of declines, suggesting the drag on manufacturing from capital spending cuts was starting to ebb.

    The signs of a slight improvement in factory activity are a boost to the economic growth outlook heading into the second half of the year and support views the Federal Reserve will raise interest rates later this year.

    “This could be a sign that manufacturing activity is starting to pick up again following the weak start to the year,” said Daniel Silver, an economist at JP Morgan in New York.

    The Commerce Department said Monday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.9 percent last month after dropping 0.4 percent in May. Economists had expected these so-called core capital goods to increase 0.4 percent in June.

    U.S. financial markets were little moved by the report as an 8.5 percent plunge in Chinese stocks overnight sparked concerns about the global economy. Stocks on Wall Street were trading lower, while prices for U.S. government debt rose on safe-haven bids. The dollar fell against a basket of currencies.

    The Fed’s policy-setting committee met Tuesday and yesterday. Most economists expect the U.S. central bank will raise interest rates in September. The Fed has kept its short-term lending rate near zero since December 2008.

    Deep investment spending cuts in the energy sector in the aftermath of a more than 60 percent plunge in crude oil prices last year have weighed on factory activity. (SD-Agencies)