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What is the durable goods report?
One of the many tools that the government uses to help keep our county healthy is the durable goods report. Along with this report are the CPI or consumer price index, PPI or producer price index, jobless claims, housing starts, and new factory orders.
The Durable Goods Report is a report that helps show the confidence the consumer has about the money they make and what they can spend, and how this affects the economy.
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Durable goods are goods that are not used quickly. They are not purchased quickly and last for several years. These goods do not wear out quickly. They are not goods that are used up all at once.
A Durable Goods Order is the report that will measure the consumer spending of the long-term goods.
This report is broken down into the different industries. This helps to eliminate the effect of single volatile industries such as defense spending.
The Durable Goods Orders also report excluding transportation expenditures. Orders for items like civilian vehicles or aircrafts are expensive and fluctuate idiosyncratically, distorting the Durable Goods Orders figure. Such goods are excluded to provide a better measure of durable goods orders.
This report will show the orders that go through for durable goods that are long lasting like:
- Cars
- Airplanes
- Home appliances
- Boats
- Business equipment
- Electronic equipment
- Home furnishings
- Photographic equipment
- Recreational equipment
- Exercise equipment
- Toys
- Games
When the economy is going strong, people tend to spend more money on these types of purchases, therefore showing confidence in the economy. When the economy is at a low point these larger purchases are much more rare.
We would purchase food before a new car, or toilet paper before a camera. This is the difference in hard goods and soft goods. You can see these changes from year to year, even at times in different areas from month to month.
The Durable Goods Report also includes:
- Shipments and unfilled orders
- No defense capital goods shipments used to predict the business investment component of the GDP or gross domestic product.
- The portion of the durable report that measures manufacturers' new orders for consumer goods and materials is a component of the leading economic indicator index. The portion that measures new orders for no defense capital goods.
- The headline number is the percent change from the prior month, but we also graph the year-on-year change. That way you can see the rate at which durable goods, orders are increasing or decreasing.
Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report.
The Durable Goods Report is considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator. Looking at the breakdown of orders by reading the entire report can minimize these problems.
Reading the details will help you see where there are purchases of these hard goods, how that looks for our economy and may give you an idea of what to expect in the immediate future.
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