U.S. durable goods orders post biggest drop in three years

Orders for long-lasting manufactured goods sank 6.8 percent in July, the biggest fall in nearly three years, led by a drop in the volatile category of civilian aircraft. But a gauge of business investment rose last month.

The U.S. Commerce Department said Friday that orders for durable goods—items meant to last at least three years—reversed a sharp gain in such orders in June.

The numbers were warped by a 19 percent drop in orders for transportation equipment, a category that bounces wildly from month to month. Specifically, orders for civilian aircraft tumbled 70.7 percent in July—payback for a 129.3 percent surge in June.

Excluding transportation, orders rose a solid 0.5 percent last month.

Economists had expected orders to drop after the big gain in June. Overall, American industry continues to look mostly solid. Manufacturers have rebounded from a slump in late 2015 and early 2016 caused by cutbacks in the energy industry and a strong dollar that makes U.S. goods costlier overseas.

Spending on durable goods accounts for a small part of American economic output. But changes in durable goods orders often signal where the economy is headed, so forecasters and investors watch the report closely.

The category that's seen as a harbinger of future business investment—orders for capital goods excluding defense equipment and aircraft—expanded 0.4 percent in July.