US Core Durable Goods Orders (m/m) measures the change in the total value of new orders placed with manufacturers for durable goods.
excluding transportation equipment, on a monthly basis. This indicator focuses on goods that are expected to last at least three years, such as machinery and appliances.
Key Points:
– Transportation is excluded: Transportation items (such as aircraft and automobiles) are excluded because their high volatility can distort the data, making it difficult to observe underlying trends in durable goods orders.
– Significance: This indicator is a leading indicator of manufacturing activity and business investment in the US economy. An increase in core durable goods orders indicates that companies are confident and willing to invest in new equipment, which may indicate economic growth.
– Impact on financial markets: Strong growth in core durable goods orders can have a positive impact on the US dollar and stock markets, as it may indicate future economic expansion. Conversely, a decline may indicate economic weakness.
This report is released monthly by the US Census Bureau and is closely followed by economists and investors.
Core Durable Goods Orders index in the United States is calculated monthly by measuring the percentage change in the total value of new orders.
It is important to note that the report excludes transportation equipment.
such as aircraft and vehicles, as they cause significant fluctuations due to large and irregular order volumes.
making the “core” version more accurate in providing a stable view of demand. After collecting the data, the steps in the calculation are to sum the total value of new orders for all durable goods except transportation equipment for the current month.
then sum the corresponding value for the previous month, and finally.
calculate the percentage change in the value of new orders between the two months.
Impact of Core Durable Goods Report on the US Dollar
The US Core Durable Goods Orders report provides insights into business investment trends and overall economic health, which in turn impacts the US Dollar (USD) in the following ways:
- Impact on Market Sentiment
– A higher-than-expected Core Durable Goods Orders number indicates increased business investment, reflecting confidence in economic growth. This typically boosts the US Dollar, as it signals an expanding economy, which could lead to future interest rate hikes by the Federal Reserve.
– Conversely, a lower-than-expected report indicates weaker business investment, which could signal a potential economic slowdown, which could dampen market confidence and lead to a depreciation of the US Dollar.
- Impact on Interest Rate Expectations
– The report can impact expectations for the Federal Reserve’s monetary policy. Strong durable goods data can fuel speculation that the Fed will tighten monetary policy to prevent the economy from overheating, supporting higher interest rates, boosting demand for the US Dollar.
– Weak data can dampen expectations for higher interest rates, which could lead to lower interest rates, making the US dollar less attractive to investors seeking higher yields.
- Correlation with Economic Growth
– Core durable goods orders are seen as a proxy for business investment and long-term economic strength. Sustained growth in this indicator indicates strong economic performance, which reinforces a positive outlook for the US dollar.
– A decline or stagnation could indicate a slowdown in economic growth.
which weakens the US dollar as investors seek safer or higher-yielding currencies.
- Risk appetite and safe haven flows
– In times of global uncertainty, strong US economic data such as core durable goods orders can attract safe haven flows into the US dollar. Investors see the US economy as more resilient, which increases demand for the dollar.
Impact of US Durable Goods Orders on Global Markets
When comparing the US Core Durable Goods Orders report m/m to similar economic indicators from other countries.
its impact on the US dollar and global markets is quite noticeable. Let’s examine the global perspective and how it compares to similar indicators from other major economies:
- Importance compared to other countries
– US Core Durable Goods Orders is a leading economic indicator for the United States, the world’s largest economy. The US has global influence due to the central role of the US dollar as the global reserve currency.
– In contrast, many other countries do not have a direct equivalent indicator with the same level of influence. For example:
– Germany releases factory orders data that provides insights into manufacturing demand in Europe’s largest economy. However, its global impact is more regional relative to the Eurozone and global trading partners.
- Global Market Reactions
– Core durable goods orders in the United States tend to have a stronger global market reaction than similar reports from other economies because the United States is not only a large importer.
but also a major global driver of consumer demand and business investment.
– For example, an unexpectedly strong core durable goods orders report in the United States could boost optimism about global economic growth and lead to a rise in risk appetite worldwide. This could strengthen the US dollar and lift global stock markets.
especially in regions closely linked to US trade such as Canada, Mexico, and Asia.
- Impact on Monetary Policy
– In the United States, strong core durable goods orders data could influence the Federal Reserve’s monetary policy, potentially leading to changes in interest rates. Since US monetary policy is closely watched globally, such data can have a significant impact on global capital flows.
