Fisher Investments Editorial Staff

Durably Good

By, 08/28/2008

Story Highlights:

  • Orders for durable goods were up 1.3% in July, much better than expected. 
  • Some folks fear a global slowdown and reduced future demand for durable goods. 
  • Weakness in a given country or sector doesn't mean weakness overall. 
  • Overall, economic conditions continue better than appreciated.


Typical of this year, fear snatches defeat from the jaws of victory as folks worry (despite today's much better than expected number) durable goods results aren't built to last. But monthly numbers are volatile and don't tell you much about the long-term trend anyway, so the better question is where they're headed over time. To grasp this, it helps to view monthly snapshots in the context of a longer trend. During the current US economic expansion, for example, monthly growth in durable goods orders has stayed pretty much in the same range—with July's 1.3% typical for the period. When viewed together with the preponderance of other data, results suggest demand for durable goods seems unlikely to head off a cliff anytime soon.

But some see signs of unraveling, citing weakening economies in Europe and Japan. The argument goes that growth—especially in foreign countries—is set to slacken this year, putting the brakes on record US exports and ultimately curbing demand for durable goods. But global demand is driven by countries the world over, not just one or even a handful. And leadership is constantly changing—there will likely never be a time when all countries are expanding equally at once. That Japan or Europe may slow doesn't mean the US or, importantly for US exports, emerging markets will. Nor does it mean Europe or Japan won't lead the way next quarter. What matters is the strength of the combined global economy, which continues to chug along just fine.    

What does all this mean for US durable goods? It's probably business as usual. But again, it helps to see the big picture. Just like regional leadership, leading components of GDP growth are also ever-changing. For a time, residential real estate was a big additive to GDP; today, the big boomer is exports. Tomorrow, who knows what it will be. Because there will likely never be a time when all segments are up equally, it's important to focus principally on their sum and refrain from pinning hopes for growth on any single factor.

And the good news today is they add up to a durable, and growing, global economy.


*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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