Durable Goods Orders

Durable Goods Orders

Definition: DGO measures the volume of orders for durable goods.

DGO is a measure of the volume of orders for durable goods received by manufacturers. Durable orders are orders whose intended lifespan is three years or more. Reports on DGO in spite of high volatility are useful to forecast figures of some constituents of GDP, such as business investments and leading indicator index. Durable Goods Orders increase stimulates activity in the producing sector and investors are active in the stock markets on speculations of further business profit increase, stocks prices begin to rise.

Durable Goods Orders report is one of industrial and trade reports. It is a component of more comprehensive industrial and trade data. Durable orders are orders whose intended lifespan is three years or more (cars, furniture etc.). About three fifths of all the goods are passenger vehicle and lorries, two fifths are building materials, furniture and household goods.

Durable Goods Orders index is highly volatile as it depends on a variety of external conditions, such as dynamics of the defence orders, natural disasters etc. To specify general trend of the index Durable goods orders excluding defence and Durable goods orders excluding transportation are taken into account.

Decrease in DGO indicates recession signs and on the contrary increase signifies activity. This index is considered to be a leading indicator as it may signal recession beginning even six months before business cycle turns and vice versa.

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

Frequency: Released monthly.

Market importance: Middle.

Analysis: From the mid of 2003 this index is in an uptrend. This indicator has been decreasing recently, in January is reached the lowest levels within the last year.

Analysis: Recently volatility has increased sharply. DGO decreased abruptly in January, which is a seasonal factor.

Conclusions:
January decrease in DGO was quite steady. Decrease in transport orders was the sharpest one because of this component volatility. High interest rates in the USA will have negative impact on DGO in the mid-term perspective. In February the index usually increases, forecasts are adequate to the situation, though figures may be better then the forecast ones.