Orders placed with U.S. factories rose more than forecast in March on increasing demand for machinery and computers that points to further gains in business spending.

Bookings for manufacturers’ goods climbed 3 percent, a fifth consecutive increase, after a 0.7 percent February advance, the Commerce Department said today in Washington. The report also revised up estimates for capital equipment bookings issued last week.

Exports to emerging economies like China, investing in new equipment and the need to increase stockpiles are driving the factory rebound at the forefront of the recovery. Federal Reserve policy makers last week said the expansion was “proceeding at a moderate pace,” boosted by stronger business spending.

“Manufacturing did pretty well in March,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Momentum picked up a little bit toward the end of the quarter, driven by exports, solid capital spending and inventories.”

Stocks pared earlier losses after the report. The Standard & Poor’s 500 Index fell 0.1 percent to 1,359.95 at 10:09 a.m. in New York. Treasury securities were little changed.

The median forecast of 66 economists surveyed by Bloomberg News projected a 2 percent increase in orders after a previously reported 0.1 percent decline in February. Estimates ranged from gains of 0.8 percent to 3.5 percent.

Emerging Markets

Demand from fast-growing countries like China and Brazil is spurring U.S. exports of machinery and consumer goods. Sales overseas reached the highest level on record in January before falling in February for the first time in six months.

A report yesterday showed factories continued to expand last month. Manufacturing grew faster than forecast, driven by gains in exports and inventories. The Institute for Supply Management’s factory index fell to 60.4 last month from 61.2 in March, the Tempe, Arizona-based group said. Readings greater than 50 signal expansion and the measure has exceeded 60 for four consecutive months, the best performance since 2004.

Orders for durable goods, which make up almost half of total factory demand, increased a revised 2.9 percent in March, up from a 2.5 percent gain reported last week, today’s figures showed.

Demand for capital goods excluding aircraft and military equipment, a measure of future business investment, climbed 4.1 percent, exceeding the 3.7 percent gain estimated last week in the Commerce Department’s report on durable goods. The February increase was also revised up to 0.9 percent from 0.5 percent.

Business Investment

Shipments of such equipment, which are used in calculating gross domestic product, increased 2.3 percent after a 0.5 percent gain in February, also up from last week’s estimates.

Business investment in equipment and software climbed at a 12 percent annual rate in the first quarter after a 7.7 percent gain in the last three months of 2010, the Commerce Department reported last week in the GDP report.

Excluding transportation equipment, where demand tends to be volatile, orders rose 2.6 percent in March, today’s report showed. Orders for machinery rose 4.4 percent, and increased 12 percent for computers.

Bookings for non-durable goods, including petroleum and chemicals, climbed 3.1 percent in March, which may reflect higher food costs and fuel costs, today’s report showed.

Caterpillar Inc. (CAT), the world’s largest maker of construction equipment, posted first-quarter profit that topped analysts’ estimates and raised its full-year earnings forecast as sales surged in developing countries.

Global Growth

“We expect that the pace of world economic growth will support continued recovery in the key industries we serve,” Doug Oberhelman, chief executive officer at Caterpillar, said in a statement last week.

Columbus, Indiana-based Cummins Inc. (CMI), a maker of diesel engines, more than doubled its first-quarter income from a year earlier and boosted its forecasts for sales and profit this year.

“Our first-quarter results reflect continued strong growth in key international markets, especially China, India and Brazil,” Chief Executive Officer Tim Solso said in a conference call last week. “We are seeing significant growth in demand for our products and services in nearly every geographic market we serve.”

Japan’s March 11 earthquake and subsequent nuclear crisis have affected some producers more than others.

Japan Disaster

Hyundai Motor Co. (005380), South Korea’s largest carmaker, posted a 32 percent gain in U.S. sales in March while Japan’s Toyota Motor Corp. reported a monthly decline. Japan’s Nissan Motor Co. and Honda Motor Co. both posted sales gains even as they braced for the full effect of the earthquake, which is still disrupting auto and parts production.

U.S. auto sales fell in March to a 13.06 million annual pace from 13.38 million in February, which was the most in 18 months, according to industry data.

The business spending that helped lead the economy out of recession is being helped this year in part by President Barack Obama’s compromise at the end of last year with congressional Republicans on taxes. Companies can depreciate 100 percent of investments in capital equipment in 2011.

“Household spending and business investment in equipment and software continue to expand,” Fed policy makers said last week after their policy meeting.