South-Western College Publishing - Economics  
Big Ticket Goods on the Decline
Subject Durable Goods Production
Topic Productivity and Growth
Key Words

Durable Goods, Nondurable Goods, Services, and Personal Consumption Expenditures

News Story

In a report from the Commerce Department, big-ticket items, commonly referred to as durable goods, declined in November by 3.1 percent. Durable goods - manufactured goods that are expected to last three years or more - are one component of personal consumption expenditures as recorded in national income accounts. Items like automobiles, personal computers, washing machines, and most furniture are durables.

If the life of a product is less than 3 years, it is labeled a nondurable good. Most food and clothing items are considered nondurable. The third category of consumer spending is services. Services consist of the work done for consumers by doctors, mechanics, lawyers, barbers, and so on. Since durable goods make up only about 12 percent of total consumer spending, the reported decline is worrisome, but not as much as if the decline were to show up in the services sector, which makes up about 59 percent of total consumer expenditures.

Economist were disappointed at the drop in orders, but many feel the November drop was a one-month adjustment rather than a sign of trouble for durable goods manufacturers and the economy as a whole. "It does point out that while manufacturers have made significant gains, manufacturing is still very fragile and conditions could change quickly," said Mark M. Zandi, chief economist at, an economic research firm. "But there is nothing that happened in November that would suggest that the declines would continue. All signals point to continued improvement in business investment."

The November figures were weaker than expected: Earlier forecasts called for a 1 percent increase in durable goods production. The weakness was widespread, including automobiles, communications equipment, computers and machinery all showing drops in orders in November. Mr. Zandi, however, said that he expected durable goods orders to bounce back in December. Economists will be keeping a close eye on the numbers for signs of further weakness.

(Updated February, 2004)


Make a list of five items for each of the three levels of personal consumption expenditures mentioned in the article

2. What is the basic characteristic of a durable good?
3. What is your definition of the term "service" as it applies to national income statistics?
Source Associated Press, "Factories Post 3.1% Decline in Orders for Durables," The New York Times Online, December 25, 2003.

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