WASHINGTON, July 2 (Reuters) - New orders for U.S. factory goods fell in May amid a decline in bookings for commercial aircraft, but demand elsewhere remained strong, partly driven by investment in artificial intelligence. 

Factory orders dropped 1.3% after an upwardly revised 5.3% jump in April, the Commerce Department's Census Bureau said on Thursday. Economists polled by Reuters had forecast orders declining 1.8% after a previously reported 4.8% surge in April.

Orders increased 5.1% year-on-year in May. Manufacturing, which accounts for 9.4% of the economy, remains supported by the AI spending boom, which has limited the drag from the U.S.-Israeli war with Iran. 

An Institute for Supply Management survey on Wednesday showed manufacturing expanding for a sixth straight month in June. Commercial aircraft orders dropped 51.8% after soaring 167.4% in April. Boeing reported on its website that it had received 27 aircraft orders in May compared to 136 in April.

Orders for computers and electronic products rose 0.2% and were up 13.0% year-on-year. Machinery orders surged 2.1%. There were also big gains in orders for primary metals and fabricated metal products. Though orders for electrical equipment, appliances and components slipped 0.3%, they increased 6.2% year-on-year.

The Census Bureau also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, rebounded 1.4% in May instead of 1.6% as estimated last week. Shipments of these so-called core capital goods edged up 0.1%, instead of rising 0.3% as previously reported.