how durable goods orders data is used
durable goods orders are a key economic indicator for investors and others monitoring the health of economies because investment prices react to economic growth it is important for investors to be able to recognize these trends orders for durable goods for example can provide information on how busy factories may be in the future and whether they ll likely need to employ more or less staff to get through current workloads businesses and consumers generally buy durable goods when they are confident the economy is improving so an increase in these orders signifies an economy trending upwards it can also be an indicator of future increases in stock prices durable goods orders tell investors what to expect from the manufacturing sector a major component of the economy and provide more insight into the supply chain than most indicators this can be especially useful in helping investors understand the earnings in industries such as machinery technology manufacturing and transportation it s worth bearing in mind that the manufacturing lead time on capital goods takes longer on average so new orders are often used by investors to gauge the long term potential for sales and earnings by the companies who make them durable goods orders data can often be volatile and revisions are not uncommon so investors and analysts typically use several months of averages instead of relying too heavily on the data of a single month special considerationsgiven the global scale of manufacturing trade wars between countries can also lead to businesses and consumers retrenching their spending on new equipment and appliances for example several american manufacturers source raw materials from china or assemble their products there the imposition of tariffs or even the threat of such a measure can have a psychological effect on businesses and lead to lower spending example of durable goods orderspropelled by tax cuts and a loose monetary policy the numbers of durable goods orders peaked in december 2007 they then subsequently fell by 38 between december 2007 and march 2009 this sharp fall in durable goods orders was attributed to the great recession that engulfed the american economy during this period businesses cut back on investment in new equipment and technologies in response to lower demand from cash strapped consumers 