WASHINGTON, June 25 (Reuters) - New orders for key U.S.-manufactured capital goods rebounded sharply in May as demand increased broadly, suggesting business spending on equipment would again underpin economic growth in the second quarter.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.6% last month after an upwardly revised 0.7% decline in April, the

the Commerce Department's Census Bureau said on Thursday.

Economists polled by Reuters had forecast these so-called core capital goods orders rebounding 0.6% after a previously reported 1.0% drop in April.

But some of last month's increase in orders likely reflected higher prices, especially for memory chips. Businesses are ramping up investment in artificial intelligence, fueling demand for information processing equipment and other related products. That is helping to blunt the hit on manufacturing from the U.S.-Israeli war with Iran, which has disrupted supply chains and driven up prices of commodities, including oil and aluminum.

Orders for computers and electronic products rebounded 0.3%, while those for electrical equipment, appliances and components rose 0.3%. There were hefty increases in orders for fabricated metal products, primary metals and machinery. Core capital goods shipments rose 0.3% in May after increasing 0.5% in April.

Business spending on equipment recorded double-digit growth in the first quarter. Gross domestic product growth estimates for the second quarter are currently as high as a 3.0% annualized rate. The economy grew at a 2.1% pace in the January-March quarter.

Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, fell 4.5% in May after surging 8.5% in April, the Census Bureau reported. They were dragged down by a 51.8% plunge in non-defense aircraft and parts orders, a very volatile category.

Boeing ( BA ) reported on its website that it had received only 27 aircraft orders in May compared to 136 in April.