New orders for long-lasting U.S. manufactured goods surged in July on strong demand for transportation equipment, government data showed on Wednesday, but a gauge of business spending fell.

The Commerce Department said durable goods orders jumped 4 percent after a 1.3 percent drop in June. Economists had expected orders to rise 2 percent last month.

Though durable goods orders are extremely volatile, the data eased fears the economy was slipping back into recession, after a raft of weak sentiment surveys.

It's consistent with the idea of positive growth but not especially strong. The underlying trend is certainly good, said Scott Brown, chief economist at Raymond James in St. Petersburg in Florida.

Prices for U.S. Treasury debt fell on the data, while stock index futures turned positive. The dollar extended losses against the euro.

Orders last month were buoyed by a 14.6 percent jump in bookings for transportation equipment, which was the largest increase since January.

Excluding transportation, orders rose 0.7 percent after gaining 0.6 percent in June and confounding economists' expectations for a 0.5 percent fall.

But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5 percent last month after a revised 0.6 percent rise in June.

Economists had expected a 1 percent fall from a previously reported 0.4 percent gain.

The decline in business spending plans, coming on the heels of weak readings from regional factory surveys so far this month, could add to fears that the manufacturing sector is running out of steam.

However, this business spending plans category normally weakens in the first month of each quarter in part because of an incomplete seasonal adjustment of the power equipment subcomponent.

Manufacturing has supported the economy's recovery. However, a plunge in share prices has hit both business and consumer confidence. Regional Federal Reserve factory surveys so far for August have been sharply weaker.

The stock market turmoil contributed to U.S. mortgage applications for home purchases falling to a nearly 15-year low last week.

In Germany, business confidence posted its steepest drop this month since the aftermath of the Lehman Brothers collapse in late 2008, raising fresh doubts about the broader European economy as it grapples with a crippling debt crisis.

Last month, U.S. durable goods orders were buoyed by a 43.4 percent surge in aircraft orders, which erased June's 24 percent slump.

Boeing received 115 aircraft orders, up from 48 in June, according to information posted on the plane maker's website.

Motor vehicle orders jumped 11.5 percent, the largest increase since January 2003, after edging up 0.1 percent the previous month, indicating a fading of the supply chain disruptions from Japan.

Outside of transportation, details of the report were mixed, with orders for machinery and computers and electronic products falling. However, orders for primary metals, and capital goods rose.

Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, edged up 0.2 percent after rising 1.9 percent in June.

A separate report showed U.S. home mortgage applications for purchases fell to a nearly 15-year low last week as resurgent worries about the strength of the economy kept buyers at bay, an industry group said on Wednesday.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

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