Booming orders for new military aircraft boosted overall orders to U.S. factories by 0.5 percent to a seasonally adjusted $371.51 billion in October, the government reported on Thursday, though demand was flat when defense was excluded.

The October increase exceeded Wall Street economists' forecasts for a smaller 0.3 percent gain. It followed a flat performance for orders in September, though that was an upward revision from a previously reported 0.4 percent orders drop.

The ongoing war in Iraq (search) appeared to be a significant factor in October, as defense capital goods orders jumped 18.4 percent to a seasonally adjusted $12.67 billion on top of an even larger 27.5 percent surge in September.

Excluding defense goods, factory orders were flat in October after declining 0.6 percent in September.

Military aircraft (search) orders shot ahead 35.3 percent to $3.26 billion in October after falling 13.4 percent in September.

Shipments of finished goods, a gauge of how busy factories are at the moment, gained 1.2 percent in October to $375.93 billion, a bounce back from September when they dropped 1.1 percent.