U.S. factory orders fall in July on weak aircraft demand

WASHINGTON (Reuters) - New orders for U.S.-made goods fell slightly more than expected in July, weighed down by weak demand for aircraft, but signs of a pickup in business spending suggested that the manufacturing sector remained on solid ground.

A worker is seen building an aircraft engine in Phoenix, Arizona, U.S. on September 6, 2016. REUTERS/Alwyn Scott

Factory goods orders dropped 0.8 percent, the Commerce Department said on Thursday. Data for June was revised slightly down to show factory orders rising 0.6 percent instead of the previously reported 0.7 percent increase.

Economists polled by Reuters had forecast factory orders falling 0.6 percent in July. Orders increased 8.3 percent on a year-on-year basis in July.

Despite the drop in factory orders in July, manufacturing, which accounts for about 12 percent of the U.S. economy, remains strong. An Institute for Supply Management survey of manufacturers published on Tuesday showed factory activity accelerated to more than a 14-year high in August.

But there are concerns an escalating trade war between United States and China could hurt business confidence and undercut capital spending. A strong dollar and worker shortages are also seen slowing momentum in the manufacturing sector.

In July, orders for transportation equipment fell 5.2 percent, dragged down by a 35.4 percent plunge in the volatile orders for civilian aircraft and parts. Orders for defense aircraft and parts tumbled 34.4 percent in July. Transportation orders rose 2.0 percent in June.

Orders for motor vehicles increased 1.3 percent in July. There were increases in orders for machinery, primary metals and computers and electronic products. Orders for fabricated metal products fell as did those for electronic equipment, appliances and components.

The Commerce Department also said July orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, jumped 1.6 percent instead of increasing 1.4 percent as reported last month. Orders for these so-called core capital goods rose 0.8 percent in June.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 1.0 percent in July instead of climbing 0.9 percent as reported last month.

Core capital goods shipments rose 1.0 percent in June. Business spending on equipment slowed in the second quarter after growing robustly since the first quarter of 2017.

Reporting by Lucia Mutikani Editing by Paul Simao