A key indicator of future manufacturing activity. This government index measures the dollar volume of orders, shipments, and unfilled orders of durable goods. Durable goods are new or used items generally with a normal life expectancy of three years or more.
Importance
Measures demand for U.S. manufactured durable goods, from both domestic and foreign sources. When the index is increasing, it suggests demand is strengthening, which will probably result in rising production and employment. A falling index suggests the opposite.
Also one of the earliest indicators of both consumer and business demand for equipment.
Background
The durable goods orders reports serves to accurately measure the dollar volume of all orders, shipments, and unfilled orders of durable goods for the preceding month. For this purpose, durable goods are defined as those goods whose intended lifespan is of three years or more.
Such orders are to be considered one of the leading indicators of manufacturing activity, and the market is often seen to move as a result of this report, despite the fact that its volatility and tendency to be subject to large revisions tend to make it a less than perfect indicator. These issues can however be minimized by looking at the breakdown of orders as the total number is often skewed by huge increases in aircraft and defense orders meaning increases based solely on strength in one sector tend to be discounted, as the market is usually more impressed with broadbased increases in orders.
This report is also notable for the narrow category of non defense capital goods which tend to mirror the GDP category PDE (producers’ durable equipment) where shipments of non defense goods are a good proxy for PDE in the current quarter, while providing an indication of PDE growth in the coming quarters.
Source:
The Census Bureau of the Department of Commerce
Availability:
Around the 26th of the month at 8:30 am EST. Data for prior month.
Frequency:
Monthly
Revisions:
None.
Links: Durable Goods Orders – U.S. Census Bureau Official Website