NONDURABLE GOODS

Nondurable, or soft, goods are those which are consumed immediately or within a short time. The U.S. Department of Commerce uses three years as the consumption period to distinguish nondurable from durable goods. Nondurable goods consist of food, clothing, and other items that are consumed within three years. Some soft goods, though, are expected to last longer than three years when purchased, such as an expensive suit or coat.

The production of nondurable goods is a component of a country's gross domestic product (GDP). As reported in the Survey of Current Business by the Bureau of Economic Analysis, nondurable goods that are sold to consumers appear under personal consumption expenditures. The other two categories of personal consumption expenditures are durable goods and services.

Nondurable goods that are produced but not sold are reported as changes in business inventories. Changes in business inventories also include durable goods. If more goods are produced than sold, then business inventories increase. On the other hand, when more goods are sold than are produced during a given period, business inventories decline. The category of changes in business inventories is used as an economic indicator to gauge the direction of a country's economy. Increases in business inventories may signal a weakening of consumer demand or a strengthening of productive activity. Finally, the production of nondurable goods also appears in the GDP as part of a nation's exports and as part of national, state, and local government purchases.

The category of personal consumption expenditures for nondurable goods is not used as an economic indicator. Most nondurable goods are purchased when needed. Changes in the level of consumer expenditures for nondurable goods tend to reflect population growth rather than economic conditions.

The purchase of nondurable goods by consumers represents a significant portion of the United States' GDP, although it is by no means the largest category of expenditures. Personal consumption expenditures in 1997, including durable goods, nondurable goods, and services, amounted to $5.49 trillion in 1997 out of a total GDP of $8.11 trillion, or 68 percent of GDP. Of that total, consumers spent $1.60 trillion on nondurable goods (19.8 percent of GDP), $673.1 billion on durable goods (8.3 percent of GDP), and $3.22 trillion on services (39.7 percent of GDP). In addition, nondurable goods contributed to the GDP in the categories of exports and government purchases.