Why durable goods orders reflect consumer demand
Why durable goods orders reflect consumer demand
Some big economic data releases are slated for this week, including consumer confidence figures, revised GDP data and the Personal Consumption Expenditures index.
On Tuesday, we’ll also get numbers on how many durable goods businesses ordered in May, like orders of tools, machinery, robotic arms and other manufactured equipment.
Manufacturers’ workloads depend a lot on the state of the economy. And right now? The global economy is slowing down, according to Chad Moutray, chief economist at the National Association of Manufacturers.
“As a result of some of that global weakness, we’re seeing demand for manufactured goods in the U.S. pretty challenged,” he said.
In many cases, Moutray said that manufacturers themselves have been buying less new equipment and machinery.
In some cases, that’s because of that slower demand. And ever since the regional bank failures that happened this year, Moutray added that manufacturers are having a harder time financing big purchases.
“It’s likely more of an issue for those small- and medium-sized manufacturers that are much more heavily dependent on those regional banks for their credit,” Moutray said.
A lot of this depends on what type of durable goods we’re talking about. Orders of computers, for example, have been rising lately.
Given how hard it’s been to find workers, “there’s even more demands to be productive, and technology is at the core of it,” said Kathy Bostjancic, chief economist at Nationwide.
Then, there are the durable goods used in parts of the economy where consumer spending is strong, like food service.
Greg Warwick is CEO of TMB Baking, which sells stuff like spiral mixers and rotating rack ovens to artisan bakeries and wholesalers.
“We’re seeing strength within both of those to support the high demand for baked goods,” he said.
It helps that consumers have been spending more on services like going out to eat, said Warwick. That means that many of his clients are doing pretty well.
But even if the economy slows down, “it doesn’t hurt that we’re supporting a segment of the industry where consumers need to purchase those core items,” he said.
That’s because baked goods are a staple.
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