At 8:30 a.m. (EST) of every month, you will find economic forecasters gathered around their computer screens to see what the Census Bureau of the Department of Commerce has for them. It is at that time that the Advance Durable Goods Shipments, New Orders, and Unfilled Orders stats are posted. Collectively the group is known as Durable Goods Orders.
To understand what the numbers mean, you have to know what durable goods are. Think of things that Tony Soprano would boost off a shipping dock that have a lifespan of at least three years. These would be your cars, appliances, furniture, jewelry, etc. If you can find it at a car dealership, Home Depot, Best Buy, Zales, Academy Sports, or Toys R Us, its probably a durable good.
Durable Goods Orders fall under the Industrial Sector Indicators. It is a leading indicator into manufacturing activity. Despite the large revisions that follow its posting, these numbers can move a market when made public. It is measured in billions of dollars, and it is the volume of New Orders, Shipment, and Unfilled Orders.
This data will give you a good pulse on consumer confidence and a good posting is bullish for the U.S. dollar. In addition, another good sign for the economy is when new orders come close or exceed orders shipped. A positive slope of orders, shipments, and unfilled orders indicate strengthening demand which usually leads to a boost in production and employment and vice versa.
Note though, you need to look at the breakdown of these numbers for an accurate picture. These numbers are easily skewed by aircraft and defense orders and I would lessen the weight of the numbers if you saw a boost in only a few sectors versus broad based gains.
It is these non-defense capital goods that give you a hint as to where Producers Durable Equipment (PDE) data is heading for the current quarter. This GDP category is the largest component of business investment.
To best use this data, you need to ask yourself what industries are showing the greatest rate of change. From there, I would begin a top down analysis starting by looking for strong companies within those industries that have some kind of niche or competitive edge.
Using Durable Goods Orders is not rocket science. Among the broad spectrum of indicators, it is among the most straight forward and easiest to understand. Combined with good research and a working knowledge of the other indicators, this is a great tool to help position you in front of a good run up in stock prices.
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