Durable Goods Orders 4% Better Than Last Year

Building on last month's positive report, this month's Durable Goods Orders Report continues to show a strengthening economy. The Commerce Department reported that business orders for machinery, computer equipment, and the like increased 4% in August when compared year-over-year. This reversed the downward trend begun last year, which culminated in negative year-over-year numbers in February and March.

By the way, most articles you read compare this month to last month, which showed a downward trend. I use year-over-year, which does a better job of predicting the GDP report, which is also year-over-year. (Source: Report on Manufacturer's Orders, Advance Report, Table 1, seasonally adjusted figures.)

Why are durable goods orders so important? Well, since they represent the orders for big ticket items, businesses will hold off making the purchases until they are confident in the economy. Furthermore, increasing orders mean increasing production. And that is good for GDP growth. That's why the Durable Goods Order report is generally considered a leading indicator.

What This Means for You

Despite the current Subprime Mortgage Crisis, the economy could definitely be on an upswing. Stay tuned for the employment report, due on October 5, which is also another good leading indicator.