New orders for US-made durable goods unexpectedly fell 0.3 percent in May on sharply lower aircraft orders, according to a government report on Friday that nonetheless showed healthy spending in other sectors.
Excluding transportation, The Commerce Department said durable goods orders - items meant to last three years or more - rose 0.7 percent, slightly more than the 0.6 percent rise economists had forecast.
Volatile civilian aircraft orders slid 17.9 percent in May after a revised decline of 29.7 percent in April, which followed massive increases of 59.9 percent in February and 72.2 percent in January.
While they had not foreseen a drop in overall orders, economists had expected the report to show the effects of civilian orders for Boeing Co returning to more sustainable levels.
The median forecast from economists polled by Reuters was for a 0.5 percent rise in overall May durable goods orders. The Commerce Department revised April's reading to 4.7 percent drop from a previously reported 4.4 percent fall.
Economists said the headline number was disappointing, but would not deter the Federal Reserve from a 17th consecutive interest rate hike when its policy-setting Federal Open Market Committee meets next Wednesday and Thursday.
Investors have been speculating this week that the Fed might raise rates as much as 50 basis points or continue its tightening campaign into August.
"I would look past the fact that orders declined and point to ex-transportation, which was up," said Ken Mayland, president of Clearview Economics LLC in Pepper Pike, Ohio. "Manufacturing continues to be in darn good shape. Business is good in manufacturing."
Financial markets initially focused on the weaker-than-expected headline number, as stock futures eased and Treasury bond prices briefly rallied, pushing down yields.
Blunting the impact of the fall in civilian aircraft orders in May was a 2.5 percent increase in orders for motor vehicles and parts, which came after a revised 2.0 percent slide in April. Communications equipment orders rose 5.9 percent.
Nondefense capital goods orders excluding aircraft, a gauge of general business investment, climbed 1.0 percent in May - matching forecasts - following a downwardly revised 1.9 percent fall in April. "The headline number was a negative surprise, there's just no getting around that, and you had a downward revision the previous month," said Michael Woolfolk, currency strategist at the Bank of New York. "Leading indicators yesterday suggest a slowing of the economy over the next three to six months, and this report fits in line with that."
In a potentially positive sign for future production, unfilled orders for durable goods rose 0.6 percent after a 1.5 percent increase in April, to the highest level since the data have been gathered in current form beginning in 1992. Unfilled orders have climbed in 12 of the last 13 months.