
Capital Goods Sector
The capital goods sector (also referred to as the "industrials sector") is a category of stocks related to the manufacture or distribution of goods. The sector is diverse, containing companies that manufacture machinery used to create capital goods, electrical equipment, aerospace and defense, engineering, and construction projects. The capital goods, or industrials sector, is a collection of companies that manufacture or distribute goods. Sales of inventory produced by machinery that comes from the capital goods sector companies can have a reverberating effect on businesses within this segment. Boeing, General Electric, Honeywell International, Union Pacific Corp., and Lockheed Martin are some of the largest companies in the capital goods sector.

What Is the Capital Goods Sector?
The capital goods sector (also referred to as the "industrials sector") is a category of stocks related to the manufacture or distribution of goods. The sector is diverse, containing companies that manufacture machinery used to create capital goods, electrical equipment, aerospace and defense, engineering, and construction projects.



Understanding the Capital Goods Sector
How the Capital Goods Sector Is Affected by Other Markets
Sales of inventory produced by machinery that comes from the capital goods sector companies can have a reverberating effect on businesses within this segment. For example, if federal budget constraints shrink defense spending, the aerospace industry could see a decline in demand for its jet fighters. Producers of the machinery used to build those planes would, in turn, see fewer orders.
Comparably, if demand for new cars decreases, the automotive industry may have to slow production and possibly discontinue underperforming product lines. The capital goods sector would see a decline as the demand for factory equipment would diminish.
Boeing, General Electric, Honeywell International, Union Pacific Corp., and Lockheed Martin are some of the largest companies in the capital goods sector.
Special Considerations
Aspects of the capital goods sector can face permanent change rather than simply be affected by cascading market fluctuations. The introduction of a new type of product or device could mean expansion for companies in the capital goods sector. The development of alternative energy concepts often calls for new infrastructure to be built. The expansion and spread of offshore wind farms to produce energy will increase demand for the wind turbines that are central to the industry. That means makers of the turbines will need more factories to produce the parts for these massive machines.
Furthermore, the materials needed to construct the turbines will also see greater demand. These and other contributing factors could lead to increases in the capital goods sector as this market grows beyond a small niche.
Other forms of innovation will also bring lasting change to companies in the capital goods sector. Fully-electric cars will require the buildup of many more charging stations to allow these vehicles to operate on the scale of gas-powered vehicles. Machinery used to create charging equipment need to be produced. Some charging stations are built with their own power sources such as solar panels or wind turbines. Increased demand for those components can translate into boosts in production for the capital goods sector. As more stations are needed to fulfill the demand to charge electric cars, more machines to make such equipment will be required at an increased pace.
Related terms:
Capital Goods
Capital goods are tangible assets that a business uses to produce consumer goods or services. Buildings, machinery, and equipment are all examples of capital goods. read more
Consumer Discretionary
Consumer discretionary is an economic sector comprising non-essential products that individuals may only purchase when they have excess cash. read more
Green Tech
Green tech is a type of technology that is considered environmentally-friendly based on its production process or supply chain. read more
Industrial Goods Sector
The industrial goods sector encompasses stocks that relate to producing goods used in construction and manufacturing. read more
Industrial Revolution
The Industrial Revolution was a period of major innovation that started in Great Britain and spread around the world during the 1700s and 1800s. read more
Internet of Energy (IoE)
The Internet of Energy refers to the automation of electricity infrastructures for energy producers, often allowing energy to flow more efficiently. read more