WASHINGTON -- Orders for long-lasting manufactured goods sank 6.8 percent in July, the biggest fall in nearly three years, led by a drop in the volatile category of civilian aircraft. But a gauge of business investment rose last month.
The Commerce Department said Friday that orders for durable goods -- items meant to last at least three years -- reversed a sharp gain in such orders in June.
The numbers were warped by a 19 percent drop in orders for transportation equipment, a category that bounces wildly from month to month. Specifically, orders for civilian aircraft tumbled 70.7 percent in July -- payback for a 129.3 percent surge in June.
Excluding transportation, orders rose a solid 0.5 percent last month.
Economists had expected orders to drop after the big gain in June. Overall, American industry continues to look mostly solid. Manufacturers have rebounded from a slump in late 2015 and early 2016 caused by cutbacks in the energy industry and a strong dollar that makes U.S. goods costlier overseas.
Spending on durable goods accounts for a small part of American economic output. But changes in durable goods orders often signal where the economy is headed, so forecasters and investors watch the report closely.
The category that's seen as a harbinger of future business investment -- orders for core capital goods excluding defense equipment and aircraft -- expanded 0.4 percent in July.
The pickup in core capital goods shipments and orders, along with an upwardly revised gain in June sales, suggests the equipment numbers that feed into GDP calculations were improving at the start of the second half of the year.
That also indicates that economic growth has the potential to broaden out beyond household spending.
Steady consumer demand is helping to underpin business optimism, and growth in overseas markets along with a weaker dollar may provide a boost to exports, further strengthening the outlook for manufacturing.
The report said orders for motor vehicles and parts dropped 1.2 percent, the largest drop since May 2016 and reflecting weak sales.
Orders for fabricated metals rose 1 percent, while those for computers and electronic products climbed 1.6 percent.
Electrical equipment and appliances orders rose 2.6 percent.
Information for this article was contributed by The Associated Press and by Shobhana Chandra and Kristy Scheuble of Bloomberg News.
Business on 08/26/2017