Section I documents the moderate pace of the recovery in general and of
durable goods spending in particular.
This is the same sort of commitment problem first noted by Coase [1972] for
durable goods monopolists.
Equation (5) indicates the direct relationship between the current rental rate and the return on the investment in
durable goods. Because new
durable goods are more expensive than used, the non-negative sign follows.
When analyzed by industry group, the data show that factory output decreased 0.5 percent in October after a 0.3 percent gain in September; the production of
durable goods dropped 0.7 percent, while that of nondurable goods slipped 0.2 percent.
The output of other durable consumer goods declined noticeably for the third consecutive month, putting it more than 4 percent below its June level and more than 1 percent below its year-ago level; the weakness in September was concentrated in household furniture, refrigerators, and miscellaneous
durable goods. In contrast to the lowered output of consumer durables in September, the production of consumer nondurables rose 0.5 percent, led by gains in the production of foods and chemical products; electricity usage and the output of clothing and paper products also increased, but gasoline output fell.
The output of
durable goods materials rose 1.1 percent, with gains in the output of parts destined for use in consumer goods or in business and defense equipment.
The strength was evident in
durable goods materials, particularly semiconductors, computer parts, miscellaneous plastics materials, and parts used to make motor vehicles.
Among
durable goods materials, decreases in metals and in motor vehicle parts and related equipment were offset by further strong gains among electronics components.
The output of the
durable goods component dropped 2.1 percent, largely because of further sizable cutbacks in the production of consumer autos and trucks.
Gains in equipment parts, however, especially semiconductors and computer parts, have been robust and have accounted for much of the 0.7 percent rise in the output of
durable goods materials in July.
The production of business equipment and
durable goods materials rose sharply.
In market groups, output of consumer goods excluding motor vehicles and electricity for residential use edged up in April and May, owing mainly to gains in production of
durable goods such as appliances, carpeting, and furniture; production of most other consumer goods has changed little in recent months.
