Durable Goods Orders

Durable Goods Orders: Overview and Key Takeaways

Durable goods orders measure new orders placed with U.S. manufacturers for long-lasting manufactured items (goods expected to last three years or more). The U.S. Census Bureau publishes the data in two releases each month: the advance report on durable goods and the manufacturers’ shipments, inventories, and orders report.

Key points:
* A rising durable goods figure generally signals economic strength and higher future industrial activity; a decline suggests weakening demand.
* Durable goods data offer more direct insight into the supply chain and future factory workloads than many other indicators.
* Because the series can be volatile, analysts typically smooth the data by looking at multi-month averages or excluding large, irregular items.

What Counts as Durable Goods

Durable goods include:
* Capital equipment and machinery (industrial machines, manufacturing equipment)
* Technology hardware (computers and related equipment)
* Transportation equipment (cars, trucks, commercial aircraft)
* Heavy equipment (steam shovels, tanks, large tools)
Commercial aircraft and other large transportation orders can represent a substantial share of the total and may skew month-to-month figures.

How the Data Is Used

Investors, economists, and businesses use durable goods orders to:
* Gauge future manufacturing activity and potential hiring needs
* Assess demand for capital goods and long-lead-time production
* Inform expectations for company earnings in sectors such as machinery, technology manufacturing, and transportation
* Anticipate supply-chain pressures or easing

Because durable goods purchases are often timed to business confidence, rising orders can precede higher investment and equity prices.

Limitations and Special Considerations

• Volatility and revisions: Durable goods orders frequently fluctuate and are revised; relying on a single month can be misleading. Analysts prefer averages over several months.
• Large, one-off orders: Big defense contracts or aircraft purchases can distort monthly results; many analysts present series excluding defense and transportation to reveal underlying trends.
• Global trade and policy effects: Tariffs, trade disputes, and cross-border supply chains can influence orders—both directly (through costs) and psychologically (by reducing investment appetite).
• Lead times: Capital goods often have long lead times, so new orders reflect expectations for sales and earnings well into the future.

Historical Example

During the Great Recession, durable goods orders peaked in December 2007 and then dropped about 38% by March 2009. The decline reflected sharp cuts in business investment as companies faced collapsing consumer demand and tightened credit.

Bottom Line

Durable goods orders are a valuable, forward-looking indicator of manufacturing and capital investment trends. Use the series to monitor supply-chain conditions and sector-specific demand, but interpret monthly figures with caution and prefer smoothed or adjusted series to avoid overreacting to one-off swings.