Durable Diet is a behavioral economics phenomenon where consumers decrease consumption of durable items, such as computers and electronic products, during times of high financial anxiety, and resume such purchases once the level of financial anxiety subsides.

Novembers’ 3.5 percent increase in orders of durable goods indicates that consumers are easing a little on their Durable Diet, which they have been on and off since the start of the Great Recession in December of 2007.  The increase in durable goods orders in November corresponds to the improvement in consumers’ level of financial anxiety reported by the Money Anxiety Index (moneyanxiety.com). During the Great Recession, consumption of durable goods decreased by 16.3 percent from $1,210 billion to $1,012 billion.  This decrease is the essence of the Durable Diet behavioral orientation, which shows how consumers prolong the use of their durable and most expensive items during times of high financial anxiety. 

The report released Tuesday by The Commerce Department shows that durable goods orders jumped 3.5 percent as demand increased for a range of goods from aircraft to machinery and computers and electronic products.  The report suggested strength in manufacturing, which supports the observation made by the Money Anxiety Index that consumers are exhibiting less financial anxiety in November thus creating greater demand for durable goods.  Non-defense orders, excluding aircraft, surged 4.5 percent making November’s figure the largest increase since January.

The link between consumers’ financial anxiety and their spending habits has been documented and demonstrated in the newly published book Money Anxiety (moneyanxiety.com), which shows how the economy improves when consumers are less financially anxious. When consumers are less financially anxious they spend more and save less, and when consumers are more financially anxious, they reduce their spending and increase their savings.

 


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