August 26, 2004 -- Demand for durable goods posted a gain of 1.7 percent in July, the biggest jump in four months, according to a new report from the Commerce Department. The increase, however, was largely due to a 5.6 percent surge in orders for commercial aircraft.

The report exceeded economists' expectations of a 1.0 percent increase. Orders for durable goods, or those expected to last three years or longer, advanced 1.1 percent in June.

Excluding the transportation category, which includes commercial aircraft, new orders increased only 0.1 percent. Defense capital spending represented the largest drag on orders. Excluding the category, orders climbed 2.7 percent during the month.

Car and auto parts sales took a big hit, plunging 5.3 percent from June, a drop that was largely expected due to plant closings for annual retooling. New orders for computers also fell hard, decreasing 6.7 percent in July.

Non-defense capital goods orders excluding aircraft increased by a moderate 0.6 percent after a 1.4 percent jump in June. Including aircraft, orders for capital goods rose 9.0 percent. Defense demand for capital goods, or those expected to last at least ten years, slid 16.2 percent.

Shipments of manufactured durable goods inched up 0.1 percent in July, while unfilled orders jumped 1.2 percent, up from a 0.6 percent increase in June. Inventories increased for the eighth consecutive month, rising 0.8 percent in July after an identical gain in June.