Durable Goods Beat Expectations; Economy Still Sour

When something–anything–beats expectations these days, it’s big news. This morning, the Commerce Department reported that durable goods orders had risen 0.8%, instead of dropping 1.2%, as expected.

What does that mean?
A durable good is something that can be used repeatedly, for several years. The category includes furniture, automobiles, planes, and appliances. Orders are a way of gauging the health of the manufacturing sector, as well as future business investment.

What drove the recent spike? Transportation, according to Forbes:

Orders for transportation equipment rose 6.3% and accounted for the overall increase in durable goods orders. Orders for civil aircraft rose 29.7%, orders for defense aircraft rose 10.1%, and orders for motor vehicles and parts rose 3.0%, the largest gain since July 2007.

lists a caveat:

Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, fell 1.4 percent after a 2.2 percent decrease in August.

In other words, two volatile manufacturing industries, planes and cars, showed increases. The defense industry is doing well, thanks to the Middle East. But overall, the picture still looks grim. Manufacturing, a major driver of the economy, is weak. This is not surprising, given previous years’ offshoring patterns.

BloggingStocks adds analysis:

Given slowing international demand and the pullback in U.S. consumer spending, the manufacturing sector remains a major concern for policy makers: it’s really hard for the U.S. economy to grow at an adequate rate without a healthy manufacturing sector.

The big question remains:
What will policymakers and manufacturers do about this problem? (Besides cutting interest rates.)

  • I believe I read last week that WalMart is looking at introducing more durable goods as well into their stores. Many were wondering why they would do this, believing it would cut down their sales, but WalMart feels that this will actually bring in more customers. I have to agree with WalMarts approach.