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Durable Goods as a Leading Economic Indicator

Guest commentary by James B. Cornehlsen, CFA
May 30, 2011 Last week’s Durable Goods Orders release for April was below analyst’s expectations and declined from the month before (see commentary here). However, neither of these comparisons provides a full picture of the economy and the business cycle. A look at the percentage change year-over-year is more indicative of the current state of the business cycle and how it can be applied to the stock market.

“Durable Goods” tracks the purchase of goods expected to last more than three years. This represents items such as machinery, appliances, automobiles, and airplanes. Some analysts say that orders for Boeing airplanes drive durable goods numbers more than anything. Thus the accompanying chart is based on Durable Goods New Orders excluding Aircraft. More…

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