Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Durables

What it is:

Durables are a category of consumer products that do not have to be purchased frequently because they are made to last a long time (typically more than three years). They are also called durable goods or consumer durables.

How it works (Example):

Consumer goods are often split into two categories: durables and non-durables. Durables have a long product life and are not worn out or consumed quickly when you use them. Since they're made to last, durable goods are usually more expensive than non-durable goods that have to be purchased over and over again.

A washing machine is an example of a durable good -- it takes many years and multiple uses to completely wear it out. The laundry detergent used in the washing machine is a non-durable good -- when the bottle is empty, the detergent is gone and must be repurchased.

Other examples of durable goods are automobiles, appliances, furniture, jewelry, consumer electronics, and sporting goods.

Why it Matters:

Since durables usually represent big-ticket items, both consumers and businesses will typically make these purchases only when confident they can afford them.

During a recession, when consumers have little confidence in the economy, there's a higher risk that demand for durable goods will decrease. This is important to remember when investing in companies that produce durables.

Furthermore, orders for durable goods can foreshadow an increase/decrease in industrial production. That's why the Census Bureau's monthly "Durable Goods Orders" report is generally considered one of the most important leading economic indicators.

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