Key takeaways
– Durable goods orders measure new orders placed with U.S. manufacturers for items expected to last three years or more (e.g., machinery, computers, aircraft). The U.S. Census Bureau publishes the data monthly.
– Because durable goods are high-cost and purchased infrequently, the series can be volatile month-to-month and is often reported both as a headline number and in “ex-transportation” or “core” measures that strip out large, lumpy items (notably commercial aircraft) and defense.
– Investors and analysts use durable goods orders as a leading indicator of factory activity, capital spending, and future earnings in manufacturing-related industries. Best practice is to interpret the series in context—using multi-month averages, core series, and complementary indicators—rather than reacting to a single monthly print.
– Primary sources: U.S. Census Bureau (data releases) and economic data aggregators; background summaries are available from financial education sites such as Investopedia.
What durable goods orders measure
– Definition: New orders for long‑lived manufactured products placed with domestic U.S. producers. “Durable” generally means an expected useful life of three years or more.
– Typical items: Industrial machinery, computer equipment, electrical equipment, appliances, raw steel, commercial aircraft and other transportation equipment, and defense-related capital goods.
– Release cadence: The Census Bureau issues two durable‑goods related reports each month (an advance report and a more complete report covering shipments, inventories, and orders). These releases include level values and percent changes month-over-month and year-over-year.
Why the series matters
– Leading signal for manufacturing activity: New orders today typically translate into production, shipments, and employment later, so rises in orders can presage stronger factory output and hiring.
– Business investment proxy: Orders for capital goods—especially core capital goods excluding aircraft and defense—are a timely indicator of business investment trends.
– Market implications: Durable goods data can affect equity, bond and FX markets because the series helps shape expectations for growth, corporate profits, and monetary policy.
– Supply chain insight: The composition and timing of orders can reveal pressure points in production and materials procurement across industries.
Key components and commonly used variants
– Headline durable goods orders: All new orders aggregated across categories.
– Ex-transportation: Removes transportation equipment (chiefly commercial aircraft), which can create large, lumpy swings.
– Nondefense capital goods ex-aircraft (commonly called “core capital goods”): A widely watched proxy for business investment, and a component used by the BEA and others to anticipate GDP and business spending trends.
– Defense orders: Separated because defense procurement follows different budgeting cycles and can be lumpy.
How analysts and investors use the data — practical steps
1) Check the headline and the “core” series
– Immediately compare the headline monthly change with the “ex-transportation” and “nondefense capital goods ex-aircraft” series. The core series often gives a cleaner read on underlying business investment.
2) Look at percent changes on multiple horizons
– Month-over-month (m/m) shows near-term momentum.
– Three‑month moving averages smooth volatility.
– Year-over-year (y/y) shows the longer trend and helps remove seasonal quirks.
3) Adjust for lumpy items and outliers
– When aircraft orders, a single large defense contract, or a one-off transaction dominates, emphasize the ex-transportation and ex-defense metrics.
– If a big outlier appears, compute a 3- or 6-month average to see whether the spike is a temporary distortion.
4) Watch revisions
– Durable goods data is revised as more information comes in. Treat the initial (advance) release as provisional and put more weight on subsequent revisions and the final monthly report.
5) Cross-check with related indicators
– Industrial production, manufacturing employment, the ISM Manufacturing PMI, capacity utilization, and business confidence surveys help confirm or contradict the signal from durable goods orders.
– Core capital goods orders should correlate with investment indicators in company earnings commentary and capital expenditure plans.
6) Consider macro and policy context
– Monetary policy, fiscal stimulus, tax changes, tariffs/trade disruptions, and global demand cycles materially influence durable goods spending. For example, tariffs or supply-chain disruptions can depress orders or change sourcing timing.
7) Translate the signal into portfolio actions (example approaches)
– Short-term traders: Use the print vs. consensus and revisions to trade cyclical sectors (industrial machinery, parts suppliers, aerospace). Apply tight risk controls because of volatility.
– Long-term investors: Use persistent trends in core capital goods and multi-month improvements to increase exposure to capital goods and industrial cyclical names. Conversely, prolonged weakness may warrant defensive positioning.
– Sector allocation: A sustained rise in core capital goods supports overweighting industrials, machinery, and select manufacturing suppliers; durable weakness suggests reducing exposure.
Special considerations and caveats
– Volatility and lumpy orders: A single month can be dominated by large aircraft or defense contracts; always check ex-transportation/ex-defense measures and multi-month trends.
– Seasonality and revisions: Durable goods are seasonally adjusted, but seasonal patterns and subsequent revisions mean single‑month readings can mislead.
– Global supply chains: Many U.S. firms source parts or assemble goods abroad. Tariffs, geopolitical shifts, or disruptions in supplier countries can affect order timing and the interpretation of the series.
– Lead time differences: Capital equipment often has long lead times. A rise in orders may signal stronger activity months ahead, so interpret timing accordingly.
Example: How a single order can distort the headline
– Scenario: A major airline places an order for several dozen commercial jets in April. The aircraft order is extremely large in dollar terms, so headline durable goods orders jump sharply month-over-month.
– Interpretation steps:
– Look at headline: large increase.
– Check ex-transportation and core capital goods: These may show a modest increase or even a decline, suggesting the broader economy isn’t necessarily improving as much as the headline implies.
– Examine revisions and follow-up months: If subsequent months show normalization, the spike was likely lumpy and transitory.
– Action: Avoid overreacting with large sector rotations based solely on the headline; prefer trades or allocation changes that reflect the core series and confirmed multi-month trends.
Practical checklist for monitoring durable goods data
– Before the release: Note consensus market expectations and which series analysts are watching (headline, ex-transportation, core capital goods).
– On release:
– Record headline m/m and y/y changes.
– Record ex-transportation and nondefense capital goods ex-aircraft changes.
– Note any large component contributions (aircraft, defense, computers/electronics).
– After release:
– Compare print to ISM, industrial production, and manufacturing payrolls for confirmation.
– Watch for immediate revisions (advance → final) in subsequent releases.
– Update any investment theses that rely on manufacturing strength or weak demand.
Where to get the data and further reading
– U.S. Census Bureau — Durable Goods Reports and release calendar (official source for the statistics): https://www.census.gov (search “durable goods” or visit the Economic Indicators section).
– Federal Reserve Economic Data (FRED) — time series for headline and core durable goods series for charting and historical analysis.
– Investopedia — background primer on durable goods orders (useful for an accessible overview).
– Company filings and earnings calls — for confirmation of sector- and firm-level capex guidance that may help interpret order trends.
Conclusion
Durable goods orders are a valuable, timely indicator of manufacturing demand and probable future factory output and business investment. Because the series can be volatile and susceptible to one-off large orders (especially in transportation and defense), best practice is to emphasize core measures, use multi-month averages, monitor revisions, and cross-check with complementary economic indicators before making investment or policy inferences.
Sources
– U.S. Census Bureau: monthly durable goods reports and data releases.
– Investopedia: “Durable Goods Orders” (background and practical commentary).