Estimated reading time: 7 minutes
Key Takeaways
- Durable goods orders offer a window into manufacturing trends and future economic health.
-
Monthly reports from the
U.S. Census Bureau track new orders, shipments, and inventories. -
This indicator strongly influences
forex markets, impacting currency values. - Core orders exclude volatile sectors like transportation and defense.
- Traders and analysts watch “durable goods” closely for early signs of economic expansion or contraction.
Table of contents
What Are Durable Goods?
“Durable goods” are items manufactured to last for at least three years. They include
automobiles, home appliances, electronics, and industrial machinery.
In contrast, goods that have a shorter lifespan (less than three years) are known as non-durable goods, such as
food, clothing, and paper products. Because durable goods generally require
substantial investment from both consumers and businesses, they reflect the confidence people have in future
economic conditions.
Understanding Durable Goods Orders
Durable goods orders refer to new purchase orders placed with domestic manufacturers for those
long-lasting goods. The
U.S. Census Bureau’s monthly Durable Goods Orders release
tracks these orders, offering insights into manufacturing activity, business confidence, and future production
potential. Key data includes new orders, manufacturers’ shipments, and inventories, painting a vital picture of
the manufacturing sector’s trajectory.
Components of Durable Goods Orders
Several critical areas are covered within durable goods orders:
-
Manufacturing Sector Involvement: Shifts in order volumes hint at changes in industrial momentum
and economic direction. -
Transportation Equipment: High-value items like automobiles and airplanes can cause volatility—leading
many analysts to focus on “core durable goods orders,” which exclude transportation. -
Shipments and Inventories: These reflect supply chain health, future production capacity, and
possible bottlenecks.
Durable Goods Orders as an Economic Indicator
Durable goods orders are viewed as a leading economic indicator because they provide early signals of where
manufacturing and, by extension, the broader economy may be headed. Rising orders typically suggest increased
investment, whereas declines may serve as an early warning for potential slowdowns. Analysts often track this
data alongside other metrics like
leading economic indicators
for a more comprehensive assessment.
Impact on the Economy
Durable goods orders extend their influence beyond factories:
-
GDP Growth: Business investment in durable goods contributes significantly to Gross Domestic
Product calculations. - Production Indicators: High order volumes often lead to increased output, employment, and capital spending.
-
Supply Chain Effects: Orders volume can directly affect manufacturers, suppliers, and logistics,
revealing bottlenecks or expansion opportunities.
Durable Goods Orders vs. Nondurable Goods Orders
Understanding the contrast between durable and nondurable goods provides a clearer view of consumer and business
behavior:
| Feature | Durable Goods Orders | Nondurable Goods Orders |
|---|---|---|
| Lifespan | 3+ years | Less than 3 years |
| Examples | Cars, appliances, machinery | Food, clothing, paper |
| Economic Implication | Indicates large investments, future confidence | Shows routine consumption trends |
| Volatility | More volatile | Less volatile |
While durable goods orders provide clues about investment behaviors, nondurable goods reveal consistent, day-to-day
consumption patterns.
Durable Goods Orders and Forex Markets
Traders in the
forex market pay close attention to
monthly durable goods reports. Strong numbers often strengthen the U.S. dollar by boosting confidence in the
American economy, whereas underwhelming figures can weaken the currency. However, transportation equipment can skew
overall data, prompting many market participants to analyze “core” durable goods orders for a steadier read on
economic trends.
Using Durable Goods Orders in Trading Decisions
Investors and traders often integrate durable goods data into strategies by:
- Comparing forecasts to actual reports to identify potential short-term trading opportunities.
- Using durable goods trends to gauge overall economic momentum and shape mid-to-long-term investment plans.
- Monitoring big-ticket items—like aircraft orders—for dramatic spikes that can distort or amplify headline data.
Staying connected to reliable information sources, including real-time news feeds and
official Census Bureau data,
can help traders act decisively when the monthly report hits.
Conclusion
Durable goods orders offer an essential view of economic vitality, reflecting shifts in manufacturing activity,
business sentiment, and broader market confidence. Because they influence both investor decisions and currency
values, these monthly figures are a must-watch for anyone interested in understanding economic cycles.
While they are only one piece of the puzzle, combining durable goods data with other indicators
creates a more holistic narrative of where markets—and the economy—may be heading.
Video
Dive deeper into durable goods orders and how they correlate with market behavior in the video below:
FAQs
What is counted as a durable good?
Any manufactured item intended to last at least three years, such as vehicles, appliances, and industrial machinery.
Why do analysts exclude transportation from “core” durable goods orders?
Because transportation orders are large and unpredictable—think commercial airplanes—removing them reveals
more consistent underlying growth trends.
How often are durable goods orders reported?
They are typically reported monthly by the
U.S. Census Bureau.
Do durable goods orders impact global markets or just the U.S.?
While most data focuses on the U.S., global investors and forex traders watch these figures to gauge the strength of
the U.S. economy, which can reverberate worldwide.
Is there a best way to use these reports for trading decisions?
Compare actual results to market forecasts, consider the breakdown between core and headline data, and watch for
larger economic trends (like consumer spending) that might confirm or contradict the report’s signals.
