Durables Goods
What Are Durables?
Durables, also known as durable goods or consumer durables, is a category of consumer goods that do not wear out quickly, and therefore do not have to be purchased frequently. They are known as "durable goods" because they tend to last for at least three years. They are, of course, a part of core retail sales data.
Some examples of durables are appliances, home and office furnishings, lawn and garden equipment, consumer electronics, toys, small tools, sporting goods, photographic equipment, jewelry, motor vehicles and motor vehicle parts, turbines, and semiconductors.
Understanding Durables
Durable goods derive their name from the fact that they last in value for a relatively long time. The opposite of a durable good, or a nondurable good, is milk. Milk is considered a nondurable good because it has a short shelf life and all of its economic value is consumed soon after production or purchase.
An individual's wealth is preserved by spending a high proportion of their income on durable, capital, or investment goods, which are goods that retain their economic value for longer periods of time. Investors, business owners, and economists keep a close eye on expenditures and new orders for durables as a sign of sustainable economic growth.
Categories of Consumption
Expenditures on consumer goods consistently account for more than 68% of U.S. gross domestic product (GDP), coming out to more than $14 trillion in purchases in 2018. Consumer goods are broken up into the broad categories of nondurable goods, durable goods, and services. Personal consumption is distinct from private domestic investment, which is expenditure on capital, including tools, factories, machinery, and residential structures, used to produce consumer goods.
In the first quarter of 2019, expenditure on durables accounted for nearly $1.5 trillion in spending. One of the main drivers of growth in this sector is transportation, such as motor vehicles and commercial jets. Transportation and defense orders are generally omitted from headline economic figures due to their greater volatility. Computers and electronic products have also been the main drivers of growth in the durables sector in recent years.
Examples of Durable Goods Companies
Some of the largest publicly traded durables producers, by market capitalization, include Kimberly-Clark Corporation, ABB Ltd., Johnson Controls, Clorox Company, Mohawk Industries, and Whirlpool Corporation. These companies are divided into the sub-sectors of containers/packaging, electrical products, industrial specialties, specialty chemicals, home furnishings, and consumer electronics/appliances, respectively. Overall, the durable goods industry is looked to as an engine of future growth.
KEY TAKEAWAYS
1. Durables are goods that do not need to be purchased very often, they are also known as durable goods and consumer durables that typically last for at least three years.
2. Economists keep a close eye on consumer consumption of durables, as it is considered a good indicator of the strength of the economy.
3. Some examples of consumer durable goods include appliances like washers, dryers, refrigerators, and air conditioners; tools; computers, televisions, and other electronics; jewelry; cars and trucks; and home and office furnishings.
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