Durable Goods is an economic indicator released monthly by the Census Bureau. It reflects new orders placed with domestic manufacturers for shipments of hard manufactured goods. To learn more, you can read the article below. Also, you can follow the GIC Instagram account for more information!

What are Durable Goods (Durable Goods Data Release)

Durable Goods is an economic indicator released monthly by the Census Bureau. It reflects new orders placed with domestic manufacturers for shipments of hard factory goods. Hard goods are goods that do not wear out quickly. They generate utility over time rather than being consumed in a single use. Goods such as bricks would be considered durable goods because they ideally never wear out. Durable goods are also classified as goods that have a long time span between successive purchases.

They typically include automobiles, appliances, consumer electronics, furniture, sporting goods, firearms, and toys. When durable goods sell well, it generally indicates a positive economy. When sales go down, so does the health of the economy. Goods that do not wear out or break down with use and that last a long time are called durable goods. Appliances, types of machinery, automobiles all fall into the category of durable goods.

Generally, consumer goods that last for 3 years or more are considered durable goods. Food, cosmetics, toiletries, cigarettes, beverages, are all non-durable goods because they will perish with use. Durables, on the other hand, have a longer product life and you can use them for a long time without using them up completely.

Durable goods do not need to be purchased as often as nondurable goods. It is better to spend income on durable goods, capital, and investments, because they retain their economic value longer. Increased spending on durable goods indicates continued economic growth.

How Do Durable Goods Orders Affect Us?

We used an estimation model to predict the direct and indirect effects of the pandemic on durable goods spending. Regarding the indirect effects, combining estimates of the MPC (Marginal Propensity to Consume) and state-level income growth, which were observed for the year 2020, resulted in predictions of higher income effects due to the pandemic on durable goods spending.

As for the direct effects of the pandemic, they are captured by the time-fixed effects predicted for the year 2020 and can be obtained residually, as the growth of aggregate durable goods spending has already been observed for 2020, even though state-level data for 2020 has not yet been released. To make the argument more concrete, consider the estimated growth in durable goods spending at the state level for the year 2020.

The panel regression model (detailed in the online appendix) can be rearranged to show that the predicted spending growth is (1) s ,2020 = [ c̅ s c̅ − ( y̅ s y̅ ) ] + y s ,2020 + ( c̅ 2020 y̅ 2020 ) , where c denotes the growth rate of durable goods spending, y denotes the growth rate of personal income, the horizontal lines above the variables indicate the average across states (subscript 2020), time (subscript s ), or both (no subscript), and the caret denotes the prediction.

Equation (1) shows that the estimated growth in state-level durable goods spending consists of three distinct terms. The first term, in parentheses, captures long-run factors and is therefore unrelated to the pandemic. This constant term measures, for each state, state-specific durable goods PCE growth that does not reflect state-specific income growth.

The second term on the right-hand side of equation (1) measures the portion of spending growth that was due to income growth in 2020. As shown above, the US national accounts show that recent growth in disposable income resulted primarily from the fiscal response to the pandemic—that is, the indirect effect of the pandemic on spending on durable goods.

The third term reflects the fixed time effects for 2020 and captures the extent to which aggregate spending growth on durable goods in 2020 was unusually high or low given aggregate income growth for that year. Although the fixed effects do not provide an explanation for the unusual spending growth other than “because of 2020,” equation (1) suggests that the third term captures economic factors, other than income, that affect purchases of durable goods.

Since the U.S. economy was severely impacted by the pandemic for most of 2020, this term likely captures shifts in demand for durable goods that are directly related to the pandemic. Shifts in demand for durable goods captured by fixed effects for 2020 could reflect multiple factors.
  • First, as shown above, the shift may reflect the substitution of durable goods for services as the pandemic changed consumer tastes and limited their access to services.
  • Second, the pandemic may have also affected durable goods spending through increased macroeconomic uncertainty, which could have dampened spending by encouraging households to postpone large-ticket purchases. Since macroeconomic uncertainty dampens durable goods spending, it would imply a stronger shift in consumer tastes toward durable goods than services, given the net magnitude of fixed effects for 2020.
  • Third, favorable financial conditions, likely related to macroeconomic policy responses to the pandemic, may have stimulated durable goods spending. Specifically, accommodative monetary policy may have lowered loan interest rates for financing durable goods purchases and encouraged asset valuations, contributing to the wealth effect on spending. However, empirical research suggests that interest rates and the wealth effect are relatively small, indicating that they may form less significant factors behind the fixed effects for 2020. Overall, the economic factors specific to 2020 capture the shift in durable goods demand during the pandemic, which likely reflects, importantly but not exclusively, consumer substitution of durable goods for services.


So, How to Read Durable Goods Orders Data on the Forex Calendar?

Knowing how to read the forex economic calendar correctly is important to maximize your analysis and trading strategy before and after key releases. Checking the calendar every morning will allow you to familiarize yourself with important upcoming events.

Note the economists' forecasts related to events (which they bring) as it can help set market expectations and the impact of the results when the 'actual' posting is compared to the forecast. In default mode, the calendar will show you every economic news release from major economies. For many people, this may be excessive information, so you might want to adjust the display.

Recurring news events tend to be the most attractive indicators because they have a predictable effect on sentiment and trading volume. Examples include scheduled publication dates for widely regarded statistics or market surveys, and anticipated events such as federal decisions on interest rates, trade balances, and inflation. Additionally, you can also read Durable Goods data and understand their values.

While other international events can influence market volatility, the economic impact and timeline of a single event are less certain and, therefore, harder to trade. There are many free versions of economic calendars available online, but designated trading platforms tend to offer account holders access to more agile calendars that cover everything.

Before you choose an economic calendar randomly, remember that your calendar is only useful if the events are relevant to the market you are targeting. Since forex trading is international, it will be very helpful to have a calendar that allows you to set specific qualification criteria and filter results by country and currency used. After understanding the impact and how to read Durable Goods as explained above, you can read other articles through the GIC Journal.

In addition, if you want to trade, you can register at GIC and deposit starting from 150,000 Rupiah only! Trade now and get all the benefits of GIC!