Importance
Durable goods orders are a leading indicator of industrial production and capital spending.

Interpretation
The bond market will rally when durable goods orders are weak, but bond prices will fall when orders are strong. A moderately healthy report for new orders bodes well for corporate profits and the stock market, however.

Durable goods orders are one of the most volatile economic indicators reported in the month. They are also revised by significant amounts each month. More than any other indicator, it is imperative to follow either three-month moving averages of the monthly levels or year-over-year percent changes. These adjustments smooth out the monthly variability and provide a clearer picture of the trend in the manufacturing sector.

Whenever economic indicators are particularly volatile, it becomes customary to exclude the more variable components from the total. In this case, market players exclude defense orders and transportation orders from durable goods because these fluctuate more than the overall total. Incidentally, aircraft orders are the guilty culprit which are included in both of these categories. Airplanes are ordered in quantity, not one at a time. Analysts exclude defense and transportation orders because they obscure the underlying trend, not because these two categories are unimportant.

Economists closely watch nondefense capital goods orders because it is a leading indicator of capital spending. Again, aircraft are excluded to increase the stability of the series.

Durable goods orders are measured in nominal dollars. Since economic performance depends on real, rather than nominal growth rates, compare the trend growth rate in durable goods orders with that of the PPI to assess the growth rate in real orders.

Frequency
Monthly.

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

Availability
Usually during the third week of the month.

Coverarge
Data are for the previous month. Data released in June are for May.

Revisions
Monthly, data for the prior two months are revised to reflect more complete information.

Annually, new seasonal adjustment factors are introduced. This revision affects at least three years worth of data. The magnitude of the revision can be substantial.