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

Interpretation
The bond market will rally (fall) when durable goods orders are weak (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 and also revised by significant amounts. 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. For instance, 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 the categories containing aircraft orders because they obscure the underlying trend, not because the aircraft industry is unimportant.

Economists closely watch nondefense capital goods orders as a leading indicator of capital spending. Aircraft can be excluded to increase the stability of the series.

Durable goods orders are measured in nominal dollars. Economic performance depends on real, rather than nominal growth rates. One can compare the trend growth rate in durable goods orders with that of the PPI for finished goods to assess the growth rate in real orders. However, inflation in the manufacturing sector was subdued in the 1990s, averaging 2 percent in the first half and less than 1 percent in the second half of the decade.

Frequency
Monthly.

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

Availability
Usually during the fourth 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 of data. The magnitude of the revision can be substantial.