New orders for U.S. durable goods (search) tumbled by a larger-than-expected 4.9 percent in July, the biggest drop since January 2004, as demand for most manufactured items fell, a government report showed on Wednesday.

Orders excluding volatile transportation equipment also slipped much more than expected, declining 3.2 percent. Economists polled by Reuters were expecting a 1.2 percent drop in durable goods orders and a 0.6 slide in durables excluding transportation.

It was the first decrease in orders for big-ticket items in four months, and the first fall in three months for orders when transportation equipment is stripped out.

Orders fell widely. Computers and electronic product orders slipped 5.9 percent, machinery orders dropped 6.2 percent, and electrical equipment orders eased 2.0 percent.

Demand for transportation equipment tumbled 8.6 percent, despite a 1.5 percent rise in motor vehicle orders. Civilian aircraft and parts orders fell 20.2 percent.

Non-defense capital goods (search) orders excluding aircraft, viewed as a proxy for business spending, slipped 3.7 percent, the largest drop since October 2004.

Orders for defense-related capital goods dropped 16.6 percent. Excluding defense, durable goods orders were down 4.5 percent.