While new orders for manufactured durable goods plunged in June, a closely watched economic indicator inside the preliminary Commerce Department report released Wednesday shows a gain for the first time in three months, as a separate report shows a hike in new home sales and another is calling for even better retail sales.

Total new orders for items designed to last three years or more fell 4%, the biggest drop in nearly two years, following a downwardly revised May decline of 2.8% and marking the second straight monthly drop. Excluding transportation orders, which fell in June by 10.5%, the overall decrease was a much smaller 0.5%.

Despite this latest trend, total new manufactured durable orders are at the same level in the first six months of the year that they were during the same time in 2015.

In contrast, an indictor of business investment, new orders for nondefense capital goods minus aircraft, increased 0.2% in June following a downwardly revised 0.5% drop in May.

While positive and certainly a step in the right direction, the minimal gain in orders at the end of the second quarter does nothing to slow the long-standing trends of lackluster business investment, according to Stifel Fixed Income Chief Economist Lindsey Piegza.

“Despite healthy corporate balance sheets and ample access to cash, businesses remain hesitant to invest in equipment, structures, and high-wage, full-time employees," she said. "The longer this trend continues, the more difficult it will be for the U.S. economy to expand beyond this stagnant 2% growth rate and the more challenging it will be for the Federal Reserve to justify a further adjustment to policy. After all, without business investment, job creation and by extension income growth and consumer spending will remain restrained.”

Overall, shipments of durable goods increased 0.4% in June, following an upwardly revised May decrease of 0.3%, posting its second improvement in the past three months. Shipments of so-called “core capital goods” fell 0.4% in June following a 0.5% May decline

Inventories of manufactured durable goods in June fell 0.2%, its 11th drop in the past 12 months.

New Home Sales Best in Years

Meantime, a separate report released a day earlier shows continuing strength in he nation’s housing market with the Commerce Department saying new home sales increased 3.5% in June, hitting its highest annual rate since February 2008.

“The fact that new home sales reached their highest pace in over eight years shows the housing market is gaining momentum,” said National Association of Homebuilders Chief Economist Robert Dietz. “The market should continue to firm throughout the year, propelled by low mortgage interest rates and solid growth in employment.”

New home sales also increased 9.3% in the second quarter of 2016 from the first quarter.   

Retail Sales Expectations Raised

The reports come as a new forecast from the nation’s retailers shows that with increases in consumer spending expected to remain solid during the remainder of the year, retail sales for 2016 are now expected to grow 3.4% this year over last year rather than the 3.1% forecast earlier.

The National Retail Federation also projects online and other non-store sales, which are included in the overall figure, are expected to increase 7% to 10% year-over-year, up from it’s previous forecast of a 6% to 9% increase.

“Economic indicators are showing positive trends for retail,” said NRF President and CEO Matthew Shay, citing the improved housing market, job growth, higher wages and other factors that have boosted consumer spending. “Challenges remain, with some greater than others depending on the retail category, but consumer confidence remains high and we believe that retail customers will continue the positive trends we have seen in the first two quarters of the year.”

Retail sales in the first half of 2016 performed at a solid pace, growing close to 4% on a year-over-year basis, according to NRF calculations, which exclude automobiles, gasoline stations and restaurants. NRF expects gross domestic product to grow between 1.9% and 2.4% for all of 2016.

“There are many factors that could prove to be hurdles but our overall outlook is optimistic,” said NRF Chief Economist Jack Kleinhenz. “Uncertainty surrounding the presidential election could make consumers more cautious, and the combination of a rising dollar and global slowdown have impacted exports, but other factors like favorable weather patterns that will help move winter merchandise support our outlook.”