Executive Summary
2024 has been a good year for durable goods orders, as businesses show that through moving capital spending into durable goods orders. However, durable goods orders are still $17.6 billion away from their peak in Nov '23. The four-month streak may break in June because of the growth slow-down in May ― from 0.2% to 0.1%. Due to the weakness in month-over-month growth in durable goods orders, we will not risk buying any stocks positively correlated with durable goods orders until the next monthly report.
You Should Care About This Leading Economic Indicator!
Durable goods orders are a major leading economic indicator of the US economy's health; they give investors and traders insight into consumer demand through the eyes of businesses. Businesses usually place orders for new goods if they see demand for them. Moreover, durable goods orders foretell what companies are expecting in the future. Remember that consumption is about 69% of the US GDP, and one-third comes from goods. This investment report will help you get insight into the US economic prosperity through businesses' confidence to order durable goods.
Durable Goods Orders Since 2019
Growth Drivers By Categories
Key Points
In May, US durable goods orders rose 0.1% and fell 1.5% MoM and YoY, respectively. It beat the consensus estimate (-0.5%). Durable goods orders are up 2.4% in 2024, currently at $283.1 billion from $276.5 billion in January. Defense aircraft and parts rose the most (22.6%), making it the main driver of durable goods orders; durable goods orders excluding defense fell 0.2% in May. Other drivers were computers and electronic products, and transport equipment which grew in the low single digits, between 0.6 and 1.3%.
Durable Goods Orders Tend to Fall During Recessions
Durable Goods Orders During Recessions
Durable goods orders usually fall during recessions as consumers pull back on consumption due to current and future employment concerns. Based on the latest report, there are no indications of a recession in the next six months as durable goods orders bounced back in February ‘24; however, if durable goods orders go below $276.5B in the next six months, the likelihood of a recession will skyrocket.
Investment Analysis → Neutral(Hold)
In the last twelve months, durable goods orders peaked in Nov '23 ($300.6B) and bottomed in Jan ‘24 ($276.5B), and it has been recovering since Feb '24. MoM growth, US durable goods orders look stable but weak, reflecting economic stability for the next three to five months. However, durable goods orders fell 1.5% compared to twelve months ago.
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