U.S. factory orders surged more than expected in July, led by aircraft demand

In July, factory orders in the United States surged more than anticipated, driven by a significant increase in demand for aircraft, according to the Commerce Department's Census Bureau. The report revealed that new orders for U.S. factory goods rose by 0.9% from the previous month, surpassing the forecast of a 0.6% increase. On a year-over-year basis, orders expanded by 6.5%.

The manufacturing sector, which constitutes 9.4% of the U.S. economy, is benefiting from an artificial intelligence buildout, although the ongoing six-month conflict between the U.S. and Iran is causing supply chain disruptions and driving up input prices. Despite this, a recent Institute for Supply Management survey indicated that manufacturers are grappling with higher prices due to the war and import tariffs in August, with some describing the economy as "annoying."

The surge in factory orders was primarily fueled by a 12.7% jump in civilian aircraft and parts orders. Orders for motor vehicle bodies, parts, and trailers also increased by 0.4%. Machinery orders grew by 0.8%, while orders for computers and electronic products declined by 1.1%, though they were up 14.3% year over year. Orders for electrical equipment, appliances, and components fell by 0.3%.

The Census Bureau also reported that orders for non-defense capital goods excluding aircraft, a key indicator of business spending plans on equipment, remained unchanged in July instead of the previously reported 0.2% increase. However, shipments of these core capital goods rose by 1.2%, slightly lower than the initial estimate of 1.4%. This temporary slowdown in core capital goods orders is expected to improve in the future.