By Sharon Nunn and Josh Mitchell 
 

WASHINGTON--Demand for long-lasting U.S. factory goods rose in March due to increased aircraft orders, but an underlying proxy for business investment fell.

Orders for durable goods--manufactured products intended to last at least three years, such as stoves and industrial robots--increased a seasonally adjusted 2.6% in March from the prior month, the Commerce Department said Thursday. Economists surveyed by The Wall Street Journal had expected a 1.8% increase.

Transportation equipment, which clocked gains in four out of the past five months, drove March's durable-goods increase. Within this category, nondefense aircraft and parts orders rose 44.5% on the month, suggesting a strong first quarter of aircraft orders at manufacturer Boeing Co. helped drive the headline figure. When excluding the transportation category, durable-goods orders were virtually unchanged in March from the previous month.

Excluding defense goods, another, more volatile category, orders rose 2.8% last month.

Overall orders were also up four out of the last five months and saw a larger-than-expected monthly gain in February too, when orders rose 3.5%. In the longer term, orders for long-lasting factory goods have marched higher since the middle of 2016. Orders rose 8.7% in the first quarter of 2018 compared to last year.

Meanwhile, the business-investment gauge, new orders for non-defense capital goods excluding aircraft, declined 0.1% in March from the prior month. This follows a robust month of capital spending growth in February.

March's business investment decline came on the heels of a tax overhaul passed in late 2017 that aimed to rev up investment by firms. Many economists expect overall U.S. economic output will grow at a faster rate this year, bolstered by the recent tax-law changes.

Business investment increased robustly in 2017, but has fallen in two of the past three months. For the first quarter overall, the gauge rose 6.5% compared to the same period last year.

Thursday's report also showed a 1.7% decline in machinery orders in the past month, the largest monthly drop since April 2016. Meanwhile, orders for communications equipment rose 8.2%, the largest gain since the beginning of 2016.

The Commerce Department's durable goods orders report can be found at http://www.census.gov/manufacturing/m3.

Write to Sharon Nunn at sharon.nunn@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com.

(END) Dow Jones Newswires

April 26, 2018 08:45 ET (12:45 GMT)

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