Durable Goods Orders Preview: Why expectations could be too high, data useful for trading GDP

  • Economists expect Durable Goods Orders to have risen in June after advancing in May.
  • Misses in most previous core orders releases and downbeat figures in June point to a disappointment. 
  • The data is useful ahead of Thursday's growth figures. 

A high bar makes failure to cross it more likely – also when it comes to economic indicators. That may provide an opportunity to sell the dollar in response to Durable Goods Orders due out on Tuesday, and better still, to prepare for Thursday's Gross Domestic Product figures. 

Reasons to lower expectations

Investment has substantially picked up as the pandemic shock faded away. Thanks to robust fiscal and monetary stimulus, it has even exceeded pre-crisis levels, as Durable Goods Orders figures from the past year have shown. However, it seems that economists have been overestimating them in recent months

Headline orders are skewed by government defense contracts, and both investors and the Federal Reserve focus on Nondefense Ex-Air Orders – aka "core of the core." 

After many successful months of beating estimates in 2020, the consensus was above expectations in all but one reads so far in 2021:

Source: FXStreet

Apart from economists' too rosy record for Durables in 2021, they have missed the slowdown in June. New Home Stales statistics for last month came out at 676,000 vs. 800,000 projected – and were only the latest to miss the mark. Consumer and business surveys such as the Purchasing Managers' Indexes also disappointed

One of the reasons for these shortfalls was a shortage of both materials and workers. The rapid reopening resulted in robust demand that was hard to match and that is a story that played out over and over again. It is hard to see why Durables would be the exception and beat forecasts – It takes time for the consensus to move. 

Market reaction

The economic calendar is pointing to an increase of 2.3% in headline orders and 0.5% in the Nondefense Ex-Air. If the numbers indeed miss expectations, and especially the latter one – the dollar has room to fall. However, as the greenback is a safe-haven currency, its slide would be more pronounced against the yen, another source of calm in times of trouble. 

Nevertheless, volatility could be muted as the publication on Tuesday comes just one day before the Federal Reserve's all-important meeting. Markets will likely be on edge ahead of Fed Chair Jerome Powell's hints about the bank's bond-buying scheme. Unless Durables are shockingly high or low, the Fed will probably be unmoved – and so will the dollar. 

That means any knee-jerk reaction to Tuesday's publication is set to be limited – and potentially reversed in short order. Beyond the Fed, there is room for a more significant in response to another top-tier event – the first release of GDP data for the second quarter of the year. 

If investment figures indeed miss expectations, it would imply somewhat slower growth than estimated. Investors may factor in weaker GDP, while economists are not asked for updated forecasts. In case Durables fall short, real GDP expectations would be revised down, leaving room for a positive surprise. That is a calculation for another day. 


Estimates for Durable Goods Orders are likely too high, as past misses on this release and disappointments in other figures for June allude to. The market reaction will likely be muted ahead of the Fed – apart from a minor mean-reversion – but the data would be useful for trading GDP on Thursday. 

Analyzing inter-market correlations to see if reflation trade is coming to an end – July 2021

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD remains below 1.1750 on dismal German IFO, risk-off mood

EUR/USD is holding steady below 1.1750 after German IFO surprised to the downside. Hawkish Fed, Evergande risks amid stimulus hopes keep investors wary. The US dollar attempts a bounce amid a cautious mood, firmer Treasury yields. Powell’s speech awaited.


GBP/USD battles 1.3700 amid risk-aversion

GBP/USD is battling 1.3700, as the US dollar holds its bonce amid worsening market mood. The pound reverses hawkish BOE-led gains, as Brexit woes and China Evergrande uncertainty weigh. Focus shifts to Powell's speech. 


XAU/USD clings to gains above $1,750, upside seems limited

Gold gained some positive traction on the last trading day of the week and recovered a part of the overnight slump to the lowest level since August 11.

Gold News

Axie Infinity nears the end of bearish outlook as AXS contemplates 25% gains

A brief technical and on-chain analysis on Axie Infinity price. Here, FXStreet's analysts evaluate how AXS behaves as it trades above key support.

Read more

Who is Evergrande, and why are they important?

Evergrande Group (HKG: 3333) is China’s second-largest real estate developer, responsible for over 1,300 construction projects across mainland China. Alongside its many apartments and commercial buildings, Evergrande has also constructed an extremely precarious balance sheet since going public in 2009.

Read more