The Impact of Macroeconomic Changes on Consumer Durable Goods Orders

This article was last updated on April 16, 2022

Canada: Free $30 Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Free $30 Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…While certain aspects of the economy appear to be "normal", some are clearly lagging the pack. In one case, the long-term sector growth has been pitiful at best.

 
Durable goods, goods that are defined as those that don't wear out quickly like household appliances, sports equipment, toys and firearms can reflect the health of the economy as a whole.   When economic conditions are poor, consumers will refrain from spending money on durable goods, preferring to save rather than spend.  This was particularly the case during and after the Great Recession as shown on this graph:
 
Just before the Great Recession, new orders for durable goods were around $36 billion in the months of July and August 2007 just before the beginning of the Great Recession.  From there, they dropped rapidly to $19.6 billion in June 2009, a drop of 45.6 percent.  Since then, durable goods orders have risen slowly and steadily, reaching a high of $39.2 billion in November 2013 and settling at $37.5 billion in May 2014.  However, as you can see on this graph, durable goods orders have grown very little in the year since early 2013 when they hit $36.2 billion as shown on this graph (with the exception of the outlying November 2013 data point):
 
If we go back to the first graph and look back in time to the early 2000s, we can see two things:
 
1.) The time taken for new orders of consumer durable goods after the 2001 recession was very short, in fact, within six months, orders were back to their pre-recession level.
 
2.) Way back in March 2004, orders of consumer durables hit $37.3 billion.  Over the decade since 2004, there has been a growth rate of only 0.5 percent.  By way of comparison, in the years between 1992 and 1999, orders for consumer durables grew by 81.1 percent from $19.86 billion to $35.96 billion.   In fact, you will note that there was very little growth in new orders for consumer goods during the period from 2002 to the beginning of the Great Recession.  This likely reflects the fact that much of the production of durable goods like household appliances and toys was shifted to offshore locations.  All you need to do is look at the manufacturers labels on your dishwasher or washing machine to prove that!
 
Despite the Fed's best efforts, while parts of the economy are showing some signs of life, growth in orders for durable goods certainly have been sluggish, particularly over the past year.  In this consumer-driven economy, the lack of growth in orders for consumer durables may go a long way to explaining why this recovery feels so modest and spotty.  On top of that, the near-zero growth rate in orders for consumer durable goods reflects the macroeconomic changes that have taken place as more and more of America's household goods are sourced from overseas locations.
 
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