U.S. Durable Goods Orders Unexpectedly Sink

New orders for long-lasting U.S. manufactured goods fell unexpectedly in June, weighed down by weak receipts for transportation equipment, a government report showed on Wednesday.

The Commerce Department said durable goods orders dropped 2.1 percent, reversing May's downwardly revised 1.9 percent increase. Durable goods are items ranging from toasters to aircraft that are meant to last three years or more.

Economists polled by Reuters had expected orders to rise 0.3 percent last month after May's previously reported 2.1 percent increase.

Durable goods orders are a leading indicator of manufacturing. Though orders tend to be volatile, last month's unexpected decline could add to fears of a slowdown in factory activity and support views that the economy will not emerge quickly from its current soft patch.

Manufacturing has been the bright spot in the economy, whose recovery has faltered since the start of the year.

Data on Friday is expected to show the economy grow at a 1.8 percent annual rate in the second quarter, according to a Reuters survey, after expanding 1.9 percent in the January-March period.

Orders last month were pulled down by an 8.5 percent drop in orders for transportation equipment. That reflected a 28.9 percent plunge in aircraft orders. Boeing received 48 aircraft orders, up from 27 in May, according to information posted on the plane maker's website.

However, the bulk of the orders were for its less expensive models.

Motor vehicle orders dropped 1.4 percent as manufacturers continue to deal with disruptions to production following the earthquake in Japan. Motor vehicle orders rose 0.3 percent in May.

Excluding transportation, durable goods orders edged up 0.1 percent after an unrevised 0.7 percent rise in May. Economists had expected this category to rise 0.5 percent.

Outside of transportation, orders for machinery fell 2.3 percent, while primary metals rose 1.0 percent. Capital goods orders fell 4.1 percent, while computers and electronic products edged up.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, slipped 0.4 percent last month after a revised 1.7 percent rise in May.

Economists had expected a 0.8 percent gain from a previously reported 1.6 percent increase. Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, rose 1.0 percent after increasing 1.7 percent in May.