New orders for U.S. factory goods unexpectedly fell in June, but demand elsewhere was solid as businesses continued to boost investment in artificial intelligence infrastructure.

Factory orders dropped 0.3% after a revised 1.1% decrease in May, the Commerce Department’s Census Bureau said on Tuesday. Economists polled by Reuters had forecast orders would rebound 0.2% after a previously reported 1.3% decline in May.

Orders increased 5.3% year over year in June. Manufacturing, which accounts for 9.4% of the economy, is getting a tailwind from the AI buildout, though the war in the Middle East is straining supply chains and keeping input prices elevated.

Front-loading of orders by businesses eager to avoid shortages and higher prices from the U.S.-Israeli war with Iran is also providing a lift.

An Institute for Supply Management survey on Monday showed manufacturing expanding for a seventh straight month in July.

Defense aircraft and parts orders fell 7.2% in June. There was a 27.2% plunge in orders for mining, oil field and gas field machinery. Overall machinery orders, however, rose 0.3%.

Orders for computers and electronic products jumped 3.2% and were up 13.9% year on year. Orders for electrical equipment, appliances and components increased 1.6%. There were increases in orders for primary metals, motor vehicles, parts and trailers as well as commercial aircraft and parts.        The Census Bureau also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.2% in June rather than the estimate of 0.9% reported last week.

Shipments of these so-called core capital goods rose 2.0% rather than the previously reported 1.9%. The government reported last week that business spending on equipment increased at a robust pace in the second quarter, notching its second straight quarter of double-digit growth.

(Reporting by Lucia Mutikani; Editing by Paul Simao)