What are Durables
Durables is a category of consumer goods that do not have to be purchased frequently. 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. Also known as "durable goods," they tend to last for at least three years.
BREAKING DOWN Durables
Durable goods derive their name from the fact 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 is consumed of all its economic value soon after production or purchase. An individual's wealth is preserved by spending a high proportion of his 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 over 68% of U.S. GDP, coming out to more than $12 trillion in purchases in 2015. 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 2016, expenditure on durables accounted for 7.3% of U.S. GDP. One of the main drivers of growth in this sector is transportation, such as motor vehicles and commercial jets. Orders for durable goods rose 3.4% in April 2016– 85% of which were new orders for commercial jets. Excluding transportation, new orders for manufactured durable goods only rose 0.4%. Transportation and defense orders are generally omitted from headline economic figures due to their greater volatility. Computers and electronic products have also been 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.