New orders for factory goods recorded their biggest drop in seven months in March, but a gauge of planned business spending rose slightly, suggesting businesses are continuing to spend despite a slowdown in factory activity.

The Commerce Department on Friday said orders for manufactured goods dropped 4 percent. Economists polled by Reuters had forecast orders falling 2.6 percent after a revised 1.9 percent increase in February.

Factory orders were dented by the aircraft industry, which is prone to sharp swings. Civilian aircraft orders plunged 48.3 percent. U.S. manufacturer Boeing had previously reported orders in March for 39 aircraft, down from 179 a month earlier.

Orders excluding the volatile transportation category decreased 2 percent, pointing to underlying weakness in the manufacturing sector that carried the economy out of the 2007-09 recession.

Orders for non-defense capital goods excluding aircraft - a closely watched proxy for business spending plans - rose 0.9 percent instead of the previously reported 0.2 percent increase. While often looked at as a core reading for orders, this measure has also been quite volatile in recent months. In February, it fell 3.2 percent.

The Commerce Department also said orders for durable goods, manufactured products expected to last three years or more, slumped 5.8 percent instead of the 5.7 percent fall reported last week, the biggest drop in seven months.

(Reporting by Anna Yukhananov; Editing by Neil Stempleman)