But underlying figures also showed more orders for civilian capital goods, often an indicator of business investment plans.

The monthly increase in orders, fired up by a 132.7-percent leap in orders for defense aircraft and parts, reversed a 1.5-percent decline in February, the seasonally adjusted data showed.

Durable goods are items expected to last at least three years, such as washing machines, cars and planes.

"The durable goods report today is good news for the beleaguered manufacturing industry," Manufacturers Alliance chief economist Daniel Meckstroth said.

"Clearly, the Iraq conflict explains the very large increase in March defense durable goods orders," he said.

"The surprising news in the report is that nondefense orders rebounded quickly from a winter storm depressed February."

Orders for transport equipment rose 2.4 percent because of the leap in defense aircraft orders. Civilian aircraft and parts orders declined 12.6 percent. Motor vehicle and parts orders fell 1.1 percent.

"The increase in defense spending is real and should not be dismissed," Wachovia Corp. senior economist Mark Vitner said.

"Recent contracts for fighter aircraft and cargo planes are likely to keep production lines humming in places like Dallas, St. Louis and Atlanta for some time to come and will also boost business for key suppliers," he said.

The data showed:

-- Capital goods orders rose 3.9 percent, including a 1.8-percent increase in orders for non-defense capital goods, closely watched as a barometer of business plans to expand and modernise.

-- Machinery orders climbed 2.3 percent.

-- Computers and electronic products orders surged 4.0 percent.

-- Electrical equipment orders rose 2.5 percent.

"The rise in capital goods, computer equipment and software expenditures is very encouraging for the US economy going forward as it indicates that business investment may be starting recover," said CDC IXIS Capital Markets economist Erik Norland.

"With consumer spending unlikely to lead the way in 2003 and 2004, business investment will be crucial," Norland said.

"This may represent the first beneficial effect of the painful corporate de-leveraging that took place in 2001 and 2002. With their balance sheets cleaned up, corporations can begin to invest again for the future."

The data showed shipments of durable goods rose 1.0 percent.

Unfilled orders rose 0.3 percent in March, after remaining flat in the previous month.

Inventories were unchanged.

SPACE.WIRE