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Morning News

Durable Goods Orders Drop Sharply in July

Aired August 24, 2000 - 11:13 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

DARYN KAGAN, CNN ANCHOR: There's a new economic report out there today. It shows that there's a larger-than-expected drop in durable goods orders. Sounds technical but it means something. Those orders took a record plunge last month, dropping 12.4 percent.

Let's find out exactly what that means from Lisa Leiter from CNN Financial News, joining us from the Chicago Board of Trade.

Lisa, good morning.

LISA LEITER, CNN CORRESPONDENT: Good morning, Daryn.

KAGAN: Explain the number to us and explain to those people who are not involved in durable goods what it means and why they should care.

LEITER: Sure. Well, durable goods are big-ticket items such as appliances and cars and airplanes, anything that's considered very expensive. And they're designed to last more than three years. So these are your big purchases here.

And this was a record drop for the month of July, down 12.4 percent. But, overall, it's important to keep in mind that this is an extremely volatile report. And the reason why it's important is because it's seen as very sensitive to interest rates. If interest rates are going up, people might not spend as much on these big-ticket items that they may have to finance if borrowing costs are going up.

But last month -- rather, in June, these months -- this report was very, very strong. So all this big drop really did was reverse the big jump from June. So, all in all, the trend over the past few months has still been very strong. And it's very important to keep in mind that demand for these big-ticket items, especially cars, is still pretty healthy, Daryn.

Lisa Leiter, Chicago Board of Trade, thank you very much.

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