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Posts by robdb5

The Economics of Auto Safety

Early-production Citroen with hydropneumatic suspension. The DS was launched in 1955, and continued for 20 years.

The 1950s and ‘60s were defining decades in the evolution of automotive safety in the United States. Prior to the ‘50s, little thought was given by the industry to passively protecting passengers in the event of a crash. But despite resistance from the American auto industry, safety eventually won out, by popular demand of the U.S. consumer.

Some auto manufacturers’ names evoke a visceral sense of safety. SAAB, Volvo, Citroën, Mercedes, Rover and others devoted much of their energies to designing and building cars that were both inherently safe and crash-worthy…

 

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Mixed Signals from Today’s Durable Goods Report

Today’s report from the Department of Commerce on new orders and shipments of durable goods sent mixed signals on the state of the economy and outlook for third quarter GDP. Total new orders for durable goods fell 0.1 percent in September following a 0.3 percent gain in August. Shipments of durable goods however, rose 0.8 percent after two months of no gains. In aggregate, new orders tend to lead shipments by a couple months.

Two key measures within the report are the new orders and shipments of nondefense capital goods excluding aircraft.  This category is a good indicator of business investment in capital equipment, a component of GDP. For this measure, signals are also mixed.  New orders for nondefense capital goods excluding aircraft fell 1.2 percent for the month while shipments rose 0.3 percent. For the third quarter as a whole, new orders for nondefense capital goods excluding aircraft rose at a 5.2 percent annualized rate while shipments fell at a 4.4 percent pace.

So what’s the take away? The data suggest that the business investment part of the upcoming report on third quarter GDP may continue to be weak but the turn-around in new orders in the third quarter could be a positive sign for business investment in the fourth quarter (see chart 1).