Durable Goods Orders

Durable Goods Orders measures new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. A durable good is defined as a good which lasts an extended period of time (over three years) during which its services are extended. Data not only provides insight to demand, but also to business investment. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business, which sets the stage for greater productive capacity in the country, possibly reducing the prospect for inflation. Durable Goods Orders are considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator. These problems can be minimized by looking at the breakdown of orders. The total number is often skewed by huge increases in aircraft and defense orders. An increase based solely on strength in one sector tends to be discounted, while the market is more impressed with broad based increases in all orders. Also notable in this report is the narrow category of non-defense capital goods. These goods mirror the GDP category, Producers' Durable Equipment (PDE) -- the largest component of business investment. Shipments of non-defense capital goods are a good proxy for PDE in the current quarter, while non-defense capital goods orders provide an indication of PDE growth in the quarters ahead. The Durable Goods Orders report is scheduled for release at 8:30 (ET) around the 26th of the month by the Census Bureau of the Department of Commerce.

POTENTIAL IMPACT ON INTEREST RATES: MODERATE