WASHINGTON(Reuters) – New orders for U.S.-made capital goods increased more than expected in August, suggesting a rebound in business spending on equipment in the third quarter, though some of the rise in orders reflected higher prices.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.3% last month, the Commerce Department said on Tuesday. These so-called core capital goods orders gained 0.7% in July. The data is not adjusted for inflation.

Economists polled by Reuters had forecast core capital goods orders rising 0.2%.

Core capital goods shipments rose 0.3% after climbing 0.6% in July. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement.

Data this month showed production at U.S. factories barely rose in August amid the Federal Reserve’s aggressive monetary policy tightening to fight inflation.

The U.S. central bank last week raised its policy interest rate by 75 basis points, its third straight increase of that size. It signaled more large increases to come this year.

Business spending on equipment contracted by the most in two years in the second quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)