A durable good, also called hard good or durables, is a type of consumer product that lasts long. In other words, the good’s functionality or usability cannot be expended in three years unless deliberate attempts are being made to sabotage the item. Furniture, precious metals, car, home appliances, etc. are durable goods. These goods don’t necessarily last a lifetime or forever but there is definitely a long gap between consecutive purchases of these goods.
As durable goods are quite a lot expensive than non-durable goods, people buy these goods only once they can afford them. In fact, a durable good purchase turns out a one-time buy for most people. For example, some people may buy a car just once in their lifetime. Some houses may even have wooden tables and wall clocks spanning generations.
Difference Between a Durable and Non-Durable Good
Durable goods could be bought by either businesses or individuals. A non-durable good is usually bought for personal use. Business durable goods could be turbine, semiconductor equipment, computer equipment, raw steel, etc. The business purchases could also be as expensive as airplanes, tanks, steam shovels, etc.
Unlike non-durable goods, durable items fetch a higher profit margin for sellers. However, the purchase cycles aren’t frequent and considerable marketing and promotion is needed to attract potential buyers. Also, during a recession, durable goods are likely to take a hit in sales, unlike non-durable goods that are immune to the adverse effects of the economy.
Durable Goods and Economy
When durable goods are produced in large quantities, it means the industrial production is strong and the economy is doing great overall. However, when durable goods production is higher than the actual demand and the business inventories increase, the economy is possibly not at its best. Businesses usually buy expensive business durable products only when they are absolutely certain about the economy’s good health.
That said, the lower market demand doesn’t necessarily mean a bad economy since buyers could postpone their durable goods purchase even if they can afford an outright buy. Similarly, increased consumer demand also doesn’t clearly denote good economy health as consumers could buy goods on credit, taking advantage of their good credit scores and the low interest rates.
Durable structures such as factories, highways, dams, etc. are not durable goods as these are not consumer products or bought for personal consumption. They are usually accounted for when computing GDP (gross domestic product) or GNP (gross national product). That said, a GDP report also comprises shipment of consumer durable goods such as dishwashers, automobiles, and washing machines.