October Durables Flip the Script: Headline Orders -2.2% m/m, Core Capex +0.5% as Backlogs Carry the Quarter

The government’s official release on 2025-12-23 delivered a classic optical illusion: October durable goods new orders fell 2.2% m/m, but strip out transportation and orders actually rose 0.2%, while the bellwether for private investment—nondefense capital goods excluding aircraft—posted a firmer +0.5%. The headline weakness is almost entirely a transportation story, and even within that, aircraft is doing acrobatics that obscure the underlying trend.

Here’s what the data reveals:

• Headline orders -2.2% m/m in October, but ex-transportation orders +0.2%; core capex new orders +0.5% and shipments +0.7% signal steady private-sector investment intent.

• Shipments rose 0.6% even as orders fell—capital goods shipments +2.1% vs new orders -5.6%—a telltale sign of backlog drawdown, not fresh demand.

• Aircraft is the whipsaw: nondefense aircraft new orders -20.1% and defense aircraft -32.4%, while nondefense aircraft shipments jumped +9.2%.

• Defense adds noise, not signal: defense capital goods new orders -11.3% in October after +24.3% in September—classic contract timing, not a trend.

• 2025 YTD looks strong at the top-line (+7.1%), but most of that is transportation (+17.0%), especially nondefense aircraft (+104.8%). Core capex ex-aircraft is a mild +3.1% YTD.

The Three-Month Tape: What the Numbers Actually Say

Below are the monthly changes over August–October. September figures are revised; October represents advance estimates.

And the YTD concentration is unmistakable:

Orders Say Slowdown, Shipments Say “Not Yet”

October’s -2.2% headline drop clashes with +0.6% in shipments. For capital goods, the divergence is even sharper: shipments +2.1%, orders -5.6%. The message: factories are meeting deliveries by working off backlog, not by booking fresh work. The “manufacturing with unfilled orders” slice confirms it—new orders -3.0%, shipments +0.9%. That keeps Q4 activity supported, but without a pickup in orders, 2026 capacity utilization risks sliding.

Crucially, the backbone of private investment looks healthier than the headline suggests. Core nondefense capital goods excluding aircraft rose for the third straight month—+0.9% in August, +1.1% in September, +0.5% in October—while shipments advanced +1.2% and +0.7% in the last two prints. This is the part of the report most correlated with future equipment spending, and it’s moving in the right direction—slowly.

Aircraft Whipsaw: Deliveries Up, Bookings Down

The October drop is transportation-heavy, and within transportation, aircraft dominates the narrative. Nondefense aircraft new orders plunged 20.1% m/m, defense aircraft fell 32.4%, yet nondefense aircraft shipments surged +9.2%. That’s a classic whipsaw: deliveries are sailing through while new bookings ebb. Given that 2025 YTD nondefense aircraft orders are up a staggering +104.8%, October’s air pocket is a reminder of how quickly the headline can turn when a single lumpy category retrenches.

Motor vehicles and parts were a non-event on orders (+0.1%), but shipments softened (-0.5%). The contrast with aircraft underscores the point: transportation is not monolithic, and relying on it to power the aggregate is risky.

Defense: Great for Headlines, Terrible for Signal

Defense capital goods orders slumped -11.3% in October after a +24.3% pop in September. That is not a demand cycle; it’s calendar math. Contract timing is amplifying monthly swings and muddling the aggregate. Excluding defense, new orders still fell 1.5% m/m, which keeps the focus on the private sector’s core capex resilience as the more reliable signal.

Under the Hood: Where Capex Is Stirring—and Where It Isn’t

Beneath the top-line volatility, sector detail shows a selective, disciplined capex pulse:

• Machinery new orders +0.8% (shipments +0.2%)—slow but steady, consistent with replacement demand.

• Computers and electronic products +1.0%, with computers and related +2.7%—a nascent upgrade cycle peeking through.

• Communications equipment -3.0%—softness likely tied to a slower carrier spend backdrop.

• Electrical equipment, appliances, and components -1.5%—a drag on the mid-cycle investment story.

• Fabricated metal products +0.5% vs primary metals -0.7%—mixed signals across the industrial supply chain.

Ex-transportation, new orders rose +0.2% in October after +0.7% in September and +0.5% in August. It’s not exuberance, it’s endurance.

What This Means for Markets

• Industrials: Backlog-rich names can keep printing decent shipments near-term, but the breadth of order declines argues for a moderation in 2026 revenue conversion unless orders reaccelerate. Favor firms tied to core private capex (machinery, select computer hardware) over those reliant on volatile aircraft cycles or defense lumpiness.

• Aerospace: October’s -20.1% nondefense aircraft orders and +9.2% shipments dynamically support near-term OEM and Tier 1 delivery narratives but raise 2026 order coverage questions. Hedge OEM exposure with suppliers leveraged to aftermarket and MRO, where deliveries now imply service tailwinds.

• Capital equipment: The three-month uptrend in core capex orders (+0.9%, +1.1%, +0.5%) and shipments (+1.2%, +0.7%) supports a selective tilt toward equipment makers with exposure to automation, compute, and precision machinery. Remain cautious on communications equipment and electrical components until order books stabilize.

• Macro/rates: The “orders down, shipments up” split reads as in-between—near-term GDP support from deliveries, but no evidence of an overheating capex cycle. The ex-transportation firmness (+0.2%) and core capex gain (+0.5%) won’t scare policymakers; nor will the aircraft-led headline drop embolden aggressive easing on its own.

Looking Ahead: The Sustainability Test

• Watch for order-to-ship ratios. Two months of rising shipments against falling aggregate orders (October total orders -2.2%, shipments +0.6%; capital goods orders -5.6%, shipments +2.1%) isn’t sustainable without new bookings.

• Track aircraft order visibility. With 2025 YTD dominated by nondefense aircraft (+104.8%), a few weak prints can swing the headline. October already showed the downside.

• Focus on core capex breadth. The investment proxy is inching higher—what matters next is diffusion. Machinery (+0.8%), computers (+2.7%) help; communications (-3.0%) and electrical (-1.5%) need to turn.

• Mind the data caveats. September figures are revised; October is an advance estimate. The release doesn’t detail cancellations or one-off removals—critical for interpreting aircraft.

The Investor Takeaway

• Position for selective capex resilience. Overweight machinery and computer-related equipment vendors aligned with efficiency and automation demand. Underweight communications and electrical equipment until order momentum stabilizes.

• In aerospace, pair OEM exposure with aftermarket and service plays to balance order volatility. October’s +9.2% nondefense aircraft shipments boost service-linked cash flows even as bookings wobble.

• For diversified industrials, favor those with shorter backlog cycles and stronger book-to-bill discipline; they’ll pivot faster if order intake slows further.

• Keep a backlog barometer. If November–December orders don’t inflect, expect 2026 revenue guidance to lean cautious, particularly for backlog-heavy names.

October’s durable goods report (2025-12-23 release) is not the downbeat headline it appears to be, nor is it a clean bill of health. It’s a handoff from aircraft-fueled optics to the quieter, steadier story: core private capex is edging higher, while shipments are being propped up by yesterday’s orders. Follow the backlog, watch the order tape—and allocate to the parts of the industrial complex where those two lines converge.