(Adds Q4 GDP estimate, analyst comments; updates markets)
WASHINGTON, Dec 4 (Reuters) - New orders for U.S.-made goods fell less than expected in October and shipments of core capital goods were much stronger than previously reported, pointing to sustained strength in manufacturing that should buoy the economy.
Factory goods orders dipped 0.1 percent amid a drop in demand for both civilian and defense aircraft after an upwardly revised 1.7 percent jump in September, the Commerce Department said on Monday.
"These data remain consistent with a solid upswing in manufacturing activity and an acceleration in corporate capital spending," said John Ryding, chief economist at RDQ Economics in New York.
Economists had forecast factory orders falling 0.4 percent in October after a previously reported 1.4 percent increase in the prior month.
Orders for non-defense capital goods excluding aircraft -seen as a measure of business spending plans - rose 0.3 percent in October instead of the 0.5 percent drop reported last month.
These so-called core capital goods orders surged 2.3 percent in September. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, advanced 1.1 percent in October instead of the previously reported 0.4 percent rise.
Core capital goods shipments increased 1.3 percent in September. October's upward revision to core capital goods shipments prompted forecasting firm Macroeconomic Advisers to boost its fourth-quarter GDP growth estimate by two-tenths of percentage point to a 2.7 percent annualized rate.
Economists at Barclays lifted their forecast to a 2.5 percent pace from a 2.4 percent rate. The economy grew at a 3.3 percent pace in the third quarter.
"The shipments revision adds upside risk to our already double-digit forecast for fourth-quarter equipment spending growth, and the revised orders data show no sign of a slowdown in capital expenditures in the months ahead," said Jesse Edgerton, an economist at JPMorgan in New York.
Business spending on equipment has increased strongly this year as corporations anticipated hefty tax cuts from the Trump administration. Republicans in the U.S. Congress have approved a broad package of tax cuts, including slashing the corporate income tax rate to 20 percent from 35 percent.
The dollar rose against a basket of currencies on the data and the anticipated fiscal stimulus, while prices for U.S. Treasuries fell. U.S. stocks were mostly trading higher.
Business spending on equipment increased at its fastest pace in three years in the third quarter, helping to underpin manufacturing. The sector, which makes up about 12 percent of the U.S. economy, is also being supported by a weaker dollar.
The greenback has lost about 7 percent of its value against the currencies of the United States' main trading partners this year. Factory activity is also being boosted by businesses replenishing depleted inventories and strengthening global demand, helping to offset a slowdown in spending on mining exploration, wells and shafts.
In October, orders for machinery rose 1.9 percent after a 0.8 percent gain in September. Mining, oil field and gas field machinery orders fell 1.4 percent after soaring 20.2 percent in September.
Orders for transportation equipment declined 4.2 percent, reflecting an 18.5 percent plunge in civilian aircraft orders and a 7.6 percent drop in bookings for defense aircraft. Transportation equipment orders rose 4.7 percent in September.
Motor vehicle orders increased 1.3 percent after being unchanged in September.
Inventories of unsold goods at factories rose 0.2 percent in October, with overall shipments increasing 0.6 percent. That left the inventories-to-shipments ratio unchanged at 1.37. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)