updated 8/24/2006 3:13:18 PM ET 2006-08-24T19:13:18

Orders to U.S. factories for big-ticket manufactured goods fell 2.4 percent in July as demand for aircraft and automobiles weakened.

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The Commerce Department reported Thursday that new orders for durable goods decreased by $5.3 billion last month. The 2.4 percent decline, which followed two straight monthly increases, was a poorer showing than the unchanged level that analysts had expected.

Much of the weakness came from a 9.6 percent drop in demand for transportation equipment, which included a 10 percent decline in new orders for commercial aircraft and parts, and a 7 percent fall in orders for motor vehicles and parts.

U.S. automakers continue to struggle with lagging sales in the face of rising gasoline prices, which have cut demand for previously popular models such as sport utility vehicles.

Analysts believe that output in the manufacturing sector will rise in coming months but at a slower pace than before, reflecting an economy that is slowing under the impact of surging energy prices, rising interest rates and a cooling housing market.

Data released Wednesday provided fresh evidence of how much that once-sizzling market has cooled. Sales of previously owned homes dropped 4.1 percent in July from June to a 2 1/2-year low while the inventory of unsold homes climbed to a record high, the National Association of Realtors reported.

The report rattled investors and pushed stock prices lower Wednesday. The Dow Jones industrials fell 41.94 points to close at 11,297.90.

Prospective home buyers have turned cautious about making such a big-ticket purchase as mortgage rates have gone up and uncertainty has risen over whether the economy and job creation will keep slowing, analysts said.

For July, orders for durable goods — items expected to last at least three years — totaled $212 billion, a decline of $5.3 billion from the June level. Excluding transportation equipment, orders were up 0.5 percent in July.

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