U.S. factories in July reported an unexpectedly quick uptick in new orders for long-lasting machinery and equipment, thanks to a surge in aircraft orders.
But excluding transportation equipment, the durable goods orders fell unexpectedly to their lowest in six months, in a sign that manufacturers continue to suffer from lower business spending as President Donald Trump escalates his trade war with China.
New orders for manufactured durable goods rose by 2.1% to $250.4 billion, the U.S. Census Bureau reported Monday in a statement. Economists, on average, had expected a gain of 1.1%, following a 1.9% increase in June.
Excluding transportation equipment, however, which can vary widely from month to month because of big aircraft purchases, new durable-goods orders fell by 0.4% vs. economists' projections for an increase of 0.05%, based on a survey by the data provider FactSet.
"The headline was boosted by a rebound in orders for Boeing (BA) - Get Report aircraft, but core orders remains sluggish," Ian Shepherdson, chief economist at the forecasting firm Pantheon, wrote in a note to clients.
The monthly durable-goods report is a key indicator of how busy factories will be in the future, and a slew of data earlier this year have suggested that manufacturers have been hurt by a dip in confidence as the trade war drags on.
Federal Reserve Chairman Jerome Powell, in a speech on Friday, described the U.S. economic outlook as "favorable" but noted that the slow pace of business investment and manufacturing activity represents a major source of weakness.
According to Shepherdson, recent surveys have shown a "downshift" in investment spending by small businesses.
"The current orders numbers are soft rather than terrible, but a deterioration appears more likely," he wrote.