Identifying Consumer Products, Intermediary Goods, and Basic Raw Materials
Capital goods, man-made items used to produce goods or provide services without further processing, play a crucial role in modern production. Unlike consumer goods, which are for end-use and their benefits will soon run out upon consumption, capital goods have a long useful life.
These durable assets, such as machinery, equipment, logistics vehicles, and property, are not components of the final item. Instead, they are used for processing output. For instance, in an aluminum factory, the factory might buy logistics trucks from an automaker, an example of a business-to-business transaction for capital goods. In contrast, households buy passenger vehicles from carmakers, an example of a consumer goods transaction.
Capital goods, like machines and logistics trucks, are used to process output and are not part of the final item. Semi-finished goods, unlike capital goods, are part of the output that requires further processing to produce the final item. Aluminum plates, for example, are intermediate goods, not capital goods.
The purchase and sale of capital goods typically occur between businesses or through wholesaler channels. Companies' capital expenditure (CAPEX) helps increase their production capacity in the future. This strategic investment is closely examined by analysts assessing a company's potential for future growth. Higher growth is expected when a company's capital spending increases.
In Germany, the leading manufacturers of capital goods in 2023 include internationally positioned companies like Nynomic AG, specializing in optical measurement technology, and Sika Group, a global leader in specialty chemicals for bonding, sealing, and related systems with operations in over 100 countries.
It's important to note that while the price per unit of capital goods is expensive, their long useful life and role in increasing production capacity make them a valuable investment for businesses. Durable goods, a subset of consumer goods, also have a longer lifespan than non-durable consumer goods, highlighting the importance of long-lasting assets in both production and consumption.
In summary, capital goods are essential for modern production, providing the means to process and produce goods and services. Their long lifespan and strategic role in increasing production capacity make them a valuable investment for businesses, contributing significantly to economic growth and development.
