Link to the Durable Goods Report:
Durable Goods
Text from vid:
Durable Goods
The Advanced Report on Durable Goods.
Durable goods are manufactured goods that have a normal life expectancy of more than 3 years, including things like cars, appliances, business equipment and machinery, computers, and furniture.
Basically, it is everything that is not a consumable.
The advanced report on Durable Goods is used to gauge the condition of the manufacturing sector, as well as the overall health of the economy.
It is reported once a month by the Dept of Commerce about 3 to 4 weeks after the month being reported.
The report is split into 2 sections, with each section having 2 categories.
The first section contains manufacturers shipments and new orders.
The 2nd section contains manufacturers unfilled orders and inventories.
New orders are just that- new orders for product.
Shipments refers to the completed product shipping to the customer.
Unfilled orders are orders that are in the process of being built.
Inventories are built and finished product that has not yet sold or shipped.
Each section is then split into many sub-sections.
There is the total orders section.
The total new orders is the main statistic reported in the media.
And then there is the total orders minus transportation, and then total orders again only this time minus defense. Because both the defense and transportation sectors can have large variances, in other words very large orders, sometimes the data from these sectors can throw off the overall total. Therefore the data is displayed with each of these sectors excluded to get a better overall picture of the economy.
Manufacturing
Primary metals: The primary metals section is the metals industry including companies like US Steel and Alcoa. Since primary metals are part of the raw materials used to produce goods, increases in demand for primary metals could be a beginning sign that inflation may soon increase.
Fabricated metals: The fabricated metal products sector includes things made from metal other than completed vehicles and complex machinery; things like hand tools, cans, structural metal products, as well as stamped and forged items.
Machinery
Some different sections for computers and electronics
Some different sections for transportation
Some different sections for capital goods including …
And an everything else section.
There are also sections for summaries in the beginning of the report.
Like the New Orders section of the ISM Manufacturing report, the new orders and shipments section of the durable goods report can be used as a leading indicator for all markets.
For instance, it can be used to gauge if the economy is expanding or contracting, and it is an excellent indicator for predicting short term changes in GDP.
The new orders and shipments section can also show which sectors are expanding or contracting.
The new orders section can be used for, among other things, gauging future employment levels.
If the level of new orders is rising, companies will need to hire more employees to build the goods.
If the level is dropping, employers may find they need to reduce the number of employees they have.
In general, an increase of new orders and shipments is seen as a good sign for the economy, because it shows that demand is increasing.
However, it depends on where the economy lies on the business cycle.
If GDP is declining or near the low end of the cycle, an increase in demand shows that the economy is improving,
On the other hand, if GDP is already near the high end of the cycle, an increase in demand could be a signal that inflation is increasing and efforts may be taken to slow down the economy such as raising interest rates.
In other words, if the economy is already booming, a report that says it is growing bigger could be considered bad news.
Unfilled orders show how busy companies currently are.
In general, an increase in unfilled orders is also seen as a good sign for the economy as it shows that the current demand is increasing, and that companies may need to add employees soon.
Inventory levels are inversely proportional to demand levels.
If the inventory levels are falling, it could mean that demand is increasing.
Conversely, if the levels are rising, it could be a sign that people are buying less and the economy is slowing down or contracting.
Like the new orders and shipments section, the inventories section can be used to gauge spending levels or GDP.
Looking at the data for each of these sub-sections gives many clues to upcoming events.
Using the durable goods report to analyze sectors can gives clues to which companies may be reporting better or worse earnings the next quarter.
In addition, by looking at the individual sections of the report, one can gain insight as to which raw materials, such as metals, may be in greater or less demand.
I’ve only touched on the many uses of this report.
Even though the whole report would not fit into the video at one time, do not be intimidated by it.
The report is only 3 pages long and only takes a couple of min to read. With such a wealth on knowledge in it, it is well worth taking the time to look it over each month.
Music:
Danse Macabre – Low Strings Finale (Theme)
Griphop
Machinations
Home Base Groove
Kevin MacLeod
incompetech.com
