Transportation buoys durable goods orders in May

WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods rose more than expected in May as bookings for transportation equipment rebounded strongly, according to a government report on Friday that could allay fears of a sharp slowdown in factory activity.

The Commerce Department said durable goods orders increased 1.9 percent after a revised 2.7 percent drop in April, which was previously reported as a 3.6 percent fall.

Economists polled by Reuters had expected orders to rise 1.5 percent last month.

Durable goods orders are a leading indicator of manufacturing and the report, which showed improvement across the board, pointed to underlying strength in a sector that has powered the economic recovery, even though recent regional factory data has shown some signs of fatigue.

Orders were a buoyed by a 36.5 percent jump in volatile aircraft bookings. Boeing received 27 aircraft orders, up from just two in April, according to information posted on the plane maker's website.

Motor vehicle orders rose 0.6 percent after plunging 5.3 percent the previous month, suggesting some improvement in auto production, which has been hit by a shortage of parts from Japan.

Excluding transportation, durable goods orders increased 0.6 percent after a revised 0.4 percent decline in April, previously reported as a 1.6 percent fall. Economists had expected this category to rise 0.9 percent.

Outside of transportation, orders for machinery, primary metals, capital goods, computers and electronic products all rose.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rebounded to increase 1.6 percent last month after a revised 0.8 percent fall in April.

Economists had expected a 1.0 percent increase from a previously reported 2.3 percent drop.

Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, increased 1.4 percent after falling 1.5 percent in April. (Reporting by Lucia Mutikani; Editing by Neil Stempleman)