March Durable Goods Orders Soar on Aircraft Surge, Masking Core Weakness

The U.S. Census Bureau’s March 2025 Advance Report on Durable Goods painted a mixed yet revealing picture of the manufacturing sector. Headline new orders surged 9.2% month-over-month (MoM) to $315.7 billion, decisively outpacing consensus expectations of a 2.0% gain. However, the strength was overwhelmingly concentrated in the transportation sector, particularly aircraft. When excluding transportation, new orders were flat, falling short of the expected 0.3% increase and pointing to more tepid underlying momentum in core manufacturing.

New Orders: Aircraft-Driven Headline Overshadows Broader Softness

The primary driver of the headline jump in new orders was transportation equipment, which soared 27.0% MoM to $124.6 billion. Nondefense aircraft and parts orders surged an eye-popping 139%, boosting overall defense-excluded orders by 10.4% (versus consensus +0.2%). But beneath the surface, the report was less inspiring. Ex-transportation orders were unchanged in March, a disappointment relative to the 0.7% gain in February and the 0.3% gain expected by economists. Key categories reflected the stagnation: general machinery orders rose just 0.1%, electrical equipment fell 0.5%, and computers and electronics dropped 1.2%.

In the capital goods space, nondefense capital goods orders excluding aircraft—a proxy for business investment—eked out only a 0.1% gain, narrowly missing the 0.2% consensus and rebounding modestly from February’s -0.3% decline. This is not the robust signal of capex acceleration that markets or policymakers would hope to see heading into Q2.

Shipments: Growth Stalls in March

Shipments of durable goods rose just 0.1% in March to $293.0 billion, a deceleration from February’s revised 1.3% gain. Notably, shipments excluding transportation posted a stronger 0.4% increase, suggesting some resilience in core categories. Primary metals shipments grew 0.8%, fabricated metals were up 0.4%, and machinery rose 0.5%. But computers and electronics slipped 0.2%, while transportation equipment shipments declined 0.5%, held back by a 10.5% drop in nondefense aircraft.

Shipments of nondefense capital goods excluding aircraft rose 0.3% in March, moderating from February’s 0.7% increase. That pace, while positive, remains inconsistent with a broader acceleration in private fixed investment for Q1 GDP.

Unfilled Orders: Aircraft Demand Propels Backlog Growth

Unfilled orders—a key metric for future production—climbed 2.0% in March to $1.43 trillion, up from February’s modest 0.1% gain. The growth was again driven by transportation equipment, where unfilled orders jumped 3.1% to $931.6 billion. In particular, nondefense aircraft orders added significant heft to the backlog, increasing 4.4% month-over-month.

Ex-transportation unfilled orders were flat, and the capital goods segment saw a 2.5% increase. This suggests that the robust aircraft bookings are creating a production cushion, but core manufacturing backlogs remain stable at best.

Inventories: Steady but Not Alarming

Durable goods inventories edged 0.1% higher in March to $533.3 billion, marking the fifth straight month of gains. Ex-transportation inventories rose 0.2%, while inventories of capital goods rose 0.4%. Defense capital goods inventories increased 1.1%, and nondefense capital goods saw a 0.3% rise.

Although the inventory/sales dynamics appear balanced for now, the sluggish shipment growth raises questions about whether inventories may become excessive if demand falters in Q2. Thus far, firms appear to be managing stock levels cautiously amid supply chain concerns and geopolitical uncertainty.

Capital Goods: Investment Still Subdued

Capital goods orders overall surged 24.3%, but this was mostly due to aircraft orders. Stripping out aircraft, nondefense capital goods orders were up just 0.1%. Shipments of the same category rose 0.3%, while unfilled orders increased only 0.1%.

This tepid performance implies that businesses remain cautious about committing to large-scale investments. With the Fed’s rate path still uncertain and global growth forecasts under pressure, firms are likely to continue prioritizing liquidity over long-horizon capital deployment.

Revisions: Neutral for Trend Direction

February new orders were revised slightly downward to $289.2B from $289.6B, while shipments ticked up to $293.0B from $292.8B. Unfilled orders were also nudged lower. These revisions are relatively minor and do not materially alter the trend narrative of soft-to-moderate underlying growth outside of aircraft-related distortions.

Looking Ahead: Mixed Signals for Fed and Q1 GDP

The March data provides a complex backdrop for monetary policymakers. The strength in headline new orders may lift Q1 GDP estimates, but the stagnation in ex-transportation figures suggests core demand remains vulnerable. The Fed is likely to discount the volatile aircraft component, focusing instead on the subdued capex indicators and slowing shipment trends. With inflation risks elevated and business investment weak, the durable goods data affirms a high-uncertainty outlook heading into Q2.