New orders for U.S. factory goods rose more than anticipated in July, supported by a rebound in demand for aircraft, according to government data released Wednesday. The Commerce Department’s Census Bureau reported that factory orders increased by 0.9 percent in July, following a revised 0.2 percent decline in June. This exceeded economists’ expectations, who had predicted a 0.6 percent rise after an initially reported 0.3 percent decrease in June.

On an annual basis, factory orders were up 6.5 percent in July. Manufacturing, which represents about 9.4 percent of the overall U.S. economy, is benefiting from growth linked to the expansion of artificial intelligence technologies. However, challenges remain as the ongoing six-month conflict between the United States, Israel, and Iran is applying pressure on supply chains and keeping input costs elevated.

A recent survey from the Institute for Supply Management indicated that manufacturers were reporting increased concerns about rising prices in August. Factors contributing to these cost pressures include both the geopolitical tensions in the Middle East and the impact of import tariffs. These elements have complicated efforts to stabilize production costs even as demand for manufactured goods shows signs of strengthening.