Durable consumer goods are products designed to last at least three years. They include kitchen equipment, computers, and industrial machinery used in factories.
New orders for durable consumer goods are one of the few indicators that combine consumer and corporate trust. This makes it an important leading economic indicator.
Consumers make big purchases when they are optimistic about the future. This is especially true for funding purchases. Financing shows confidence in the ability to make payments.
Pessimistic consumers delay purchases. Think of your family. If you are worried about losing your job, you probably avoid new debt. This idea applies to the larger economy. Millions of households behave that way.
These same factors also affect business decisions. If management is optimistic, the company makes a big purchase, and if it is pessimistic, it postpones the decision.
The long-term trend in durable consumer goods orders is bullish. The graph below shows that the consumer durables trend has been below the trend for 10 years.
Orders for new durable consumer goods suggest another roaring twenties
Increased economic growth could signal the Roaring Twenties
The blue line is the linear regression of the data. This shows the long-term upward trend in new orders needed for the economy to grow in the long run.
The 48-month moving average for new orders is shown by the dashed green line. This MA points in the direction of business cycle trends. MA has been below trend since October 2010.
We know that without new orders, consumers and businesses are pushing equipment and equipment beyond their expected useful life. They need to make up for it with new purchases in the next few years.
This indicates that the recent surge in new orders is the beginning of a long-term trend. The peak of new orders is probably years away. It can benefit equipment and consumer electronics manufacturers. It has the potential to drive productivity gains, boost economic growth and fulfill the Roaring Twenties promise.
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Michael CarrI ’m a chartered market technician.Banyan HillPublisher and editor One trade,Peak speed traderAndPrecision profit.. He teaches technical and quantitative technical analysis at the New York Institute of Finance. Kerr is also a former editor of the CMT Association newsletter.Technically speaking..
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