Demand for wholesale durable goods has been on the rise over the past few years, driven at least in part by pandemic-related lifestyle changes and economic policies. Both globally and in the US, durable goods sales have seen above-average increases as people spend more time 鈥� and money 鈥� at home. While pandemic precautions and habits have been gradually returning to normal, the market for wholesale durable goods continues to grow.
What Products Are Considered Durable Goods?
Durable goods are items that typically have a life expectancy of three or more years and aren鈥檛 meant to be consumed or expired. They fall into two categories: consumer durable goods and business durable goods. Consumer durable goods are the type of product a person uses in their day-to-day life, such as furniture, cars, electronics, sporting equipment, and other goods. Business durable goods are used in various industries, such as construction equipment, manufacturing machinery, trucks, and other professional equipment.
Wholesale Durable Goods in the US and Globally
The global wholesale durable goods industry grew from a market value of $21 trillion in 2022 to $22.3 trillion at the start of 2023, rising at a compound annual growth rate (CAGR) of almost 6%. According to The Business Research Company, the industry is expected to hit $26.7 trillion in 2027 with a CAGR of close to 5%. The largest region in the wholesale durable goods industry is currently Asia-Pacific.
Demand for durable goods in the US is high as well. In 2021 durable goods made up nearly 27% of American wholesalers鈥� total gross margins, with pharmaceutical wholesalers accounting for some of the highest revenues in the industry. In total, US wholesale durable goods sales were valued at $4.44 trillion, a substantial increase of over $600 billion from 2020.
While the sales of durable goods are expected to rise over the coming year, their growth will likely be tempered by the impact of inflation on consumer spending. Rising wages and strong house prices are bolstering demand, but a return to pre-pandemic habits is also increasing demand for non-durable goods and services, reducing the amount of disposable income available for durable goods. The increasing costs of essentials such as food and gas prices will also impact disposable income.
How Did the Pandemic Impact Demand for Durable Goods?
Research suggests that the pandemic likely had a significant direct and indirect impact on the durable goods market in the US and elsewhere around the world. With consumers isolating and social distancing, especially in the early months of the pandemic, there was a shift in spending away from many types of services and towards durable goods, directly impacting the market.
Services such as indoor dining, gyms, and various recreational activities were made unavailable or undesirable for parts of the pandemic, resulting in lower spending on those services and a consequently larger amount of disposable income available for other uses. Many consumers chose to spend that money on durable goods that provided a substitute for the services they were no longer using: better kitchen appliances, exercise equipment, entertainment systems, and other home improvement or leisure products. As people were spending significantly more time at home, both work and leisure, they were motivated to make those spaces more comfortable, efficient, and entertaining.
The indirect impact of the pandemic is also related to disposable income. While the absence of many activities that consumers would normally enjoy is one factor contributing to an increase in disposable funds, fiscal policy responses in the US also had an impact. In this way the pandemic changed not only the types of things consumers wished to buy, but also how much they were able to buy, indirectly contributing to a rise in demand for durable goods.
What Do Strong Durable Goods Sales Say About the Economy?
Durable goods can be used to help gauge the strength of an economy, as high demand for these items typically means that consumers have sufficient disposable income with which to purchase them. The US Census Bureau publishes a monthly Durable Goods Report that provides data on industrial activity levels across industries, providing an indicator of economic health.
Because durable goods are long-lasting, they are an infrequent investment for both businesses and consumers. Rising orders for durable goods mean a need for higher production levels and can therefore lead to higher levels of employment, which also strengthens the economy. More orders from industrial customers also suggest that businesses are investing in their futures, indicating that they expect a rise in the economy and higher demand for their products and services.
The US durable goods report therefore can identify upswings and downturns in the economy based on how much consumers are willing to spend and how much businesses are investing in growth. However, it鈥檚 important to keep things in perspective: because this is a monthly report, it can be substantially impacted by the actions of one large corporation or government entity, such as a bulk order or canceled contract. This makes it important to look at trends across multiple reports and not lean to heavily on any one individual month.
While the November durable goods report saw a fall of 1.7%, December saw a significant upswing of 5.6%, with a total of $286.9 billion in orders for manufactured durable goods that month. Neither of these reports provides a complete picture of the industry, however, as both prove to be outliers for 2022. As a whole, however, durable goods orders rose most months of the year, just not typically to the heights that December鈥檚 report might suggest. Overall, this indicates a positive trend for the industry and for the economy in general.
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