The consumer discretionary sector, includes stocks of companies that produce consumer goods, that are considered non-essential to the people purchasing them.
This includes durable goods, which are goods designed to last more than three years. Also, apparel, entertainment and leisure, and autos.
When consumers are purchasing consumer discretionary products, it usually indicates that they are confident with their financial situation. In a recession, consumers will cut back on the purchase of consumer discretionary goods.
Consumer discretionary goods purchased by consumers, may foreshadow an increase or a decrease in industrial production. Therefore, a rise in the profits of consumer discretionary sector stocks, is considered a positive leading indicator for the economy. A drop is considered a negative leading indicator.