Importance: **

Definition: Durable goods orders are a leading indicator of manufacturing activity. Increases in orders leads to increases in production. Drops in orders are followed by a build-up of inventories and, eventually, a decline in production. Economists use durable goods data to forecast changes in manufacturing.

Related Indicators:

Source: Bureau of the Census of the U.S. Department of Commerce

Frequency: Monthly

Availability: Three to four weeks following the reported month

Direction:

Timing:

Volatility: Very High

Likely Impact of Financial Markets: 

                    Interest Rates: Larger-than-expected monthly increase or increasing  trend is
                    considered inflationary, causing bond prices to drop and yields and interest rates to
                    rise.

                    Stock Prices:

                    Exchange Rates:

Ability to Affect Markets:

Analysis of the Indicator:

This report has two main weaknesses--the data is extremely volatile and is frequently revised
following its release. The volatility is due to the defense and transportation sectors, which account for
large dollar items that are ordered on an irregular basis, causing unexpected surges in the monthly
figures. Economists typically use the data by excluding defense and transportation orders and
analyzing the three- to six-month moving average.

Durables are hard to predict. A strong report is bad news for the bond market, causing the bond to
slump. Likewise, a weak report is viewed positively by investors.

WEB Links

A Graph of the latest Durable Goods Orders data from The Economic Statistics Briefing Room
of the White House.

The latest Durable Goods Orders report from BLS.