Factory orders up 2.3% in August, vs. 2.1% increase expected

New orders for U.S.-made goods recorded their biggest increase in nearly a year in August, boosted by a surge in demand for aircraft, but signs of weakness in business spending on equipment suggested that the manufacturing sector could be slowing.

Factory goods orders surged 2.3 percent, the largest increase since September 2017, the Commerce Department said on Thursday. Data for July was revised up to show factory orders falling 0.5 percent instead of the previously reported 0.8 percent drop.

Economists polled by Reuters had forecast factory orders rebounding 2.1 percent in August. Orders increased 8.6 percent on a year-on-year basis in August.

Manufacturing, which accounts for about 12 percent of the U.S. economy, is being supported by robust domestic demand, but momentum is expected to gradually slow amid worker shortages, an increasingly bitter trade war between the United States and China, a strong dollar and moderating global growth.

An Institute for Supply Management survey of manufacturers published on Tuesday showed factory activity retreated from a 14-year high in September.

In August, orders for transportation equipment vaulted 13.1 percent, the largest gain since June 2017. That reflected a 69.1 percent surge in the volatile orders for civilian aircraft and parts. Orders for defense aircraft and parts soared 17.0 percent in August. Transportation orders fell 3.6 percent in July.

Orders for motor vehicles rose 1.0 percent in August after increasing 1.6 percent in July. There were increases in orders for primary metals, fabricated metal products and electronic equipment, appliances and components. But orders for machinery and computers and electronic products fell.

The Commerce Department also said August orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, fell 0.9 percent instead of declining 0.5 percent as reported last month. Orders for these so-called core capital goods rose 1.5 percent in July.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, dropped 0.2 percent in August instead of rising 0.1 percent as reported last month.

Core capital goods shipments increased 1.2 percent in July. Business spending on equipment slowed in the second quarter after growing robustly since the first quarter of 2017.