Business orders for durable goods are on a rollar-coaster ride, rising 9.9% in September after dropping a stomach-churning 13.1% in August. The reason for both? The sales of commercial aircraft. In September, Boeing received orders for 11 Dreamliner 787s from Nippon Airlines. In August, orders were down after Boeing received many orders at July's Paris Air show. This increase is not just seasonal. When durable goods order are compared year-over-year, it shows a 9.41% increase when compared to last September. For a look at the data, see Durable Goods Spreadsheet in Google docs.
The durable goods report is one of the most important leading economic indicator. That's because the Census Bureau's report measures business orders for machinery, automobiles and equipment. These orders reflect business confidence.
While orders for durable goods is a leading indicator, shipments of durable goods can predict the current quarter's Gross Domestic Product (GDP). In fact, shipments were up .8%, after falling 2.9% in August and rising 1.8% in July. These shipments helped push the third quarter GDP growth rate to 2%, after its relatively poor 1.3% showing in the second quarter. (Source: Census Bureau, Advance Report on Durable Goods, October 25, 2012 )
What This Means for You
Despite economic uncertainty surrounding the fiscal cliff, the Presidential election and the eurozone crisis, businesses are still ordering new equipment. This should only improve as we head into next year as the political situation, and its impact on the economy, solidifies.
- Durable Goods as a Component of GDP
- Why You Should Follow Leading Economic Indicators
- Romney and Obama's Economic Plans