A couple weeks ago, in his testimony before Congress, Fed Chairman Greenspan forecast that a second-half slowdown in purchases of durable goods would help to slow the rate of economic growth to a more sustainable level than that experienced in the second quarter.

Durable goods are items that have a useful life of three or more years. It typically takes longer to produce durable goods than it does to produce nondurable goods. Because of this, data about activity in the durable goods sector provides clues about future economic activity.

On July 25, the Commerce Department reported that new orders for manufactured durable goods had decreased in June, the second decline in three months. Based on this, it looked like chairman Greenspan's prediction was coming true.

Just last week we reported that Factory Orders, which include both durable and nondurable manufactured goods, had declined in June, and that the year-to-date and year-over-year growth in orders had decreased. We also reported that, during June, consumers were earning more money but spending less, and that, during July, the manufacturing sector as a whole had slowed to a standstill.

What's all this have to do with auto sales? More precisely, what do auto sales have to do with all of this? Well, next to the purchase of a home, the purchase of a car or light truck is the largest purchase that most consumers will ever make. But, the decision to purchase an auto is one that usually can be deferred. If times are tight, consumers may decide that the purchase of a new car is something that can be delayed. Thus, auto sales are a sensitive indicator of the relative strength of the general economy. Sales of autos make such a significant contribution to the durable goods and factory orders statistics that the Commerce Department reports these figures both with and without auto sales included.

So, what's been happening lately with auto sales?

Yesterday, the final report came out on sales of cars and light trucks during July. On an average daily sales basis, car sales declined by 2.4 percent from sales during July 1995. Truck sales, on the other hand, increased by 5.8 percent from the same month last year. More cars than trucks were sold so, when the sales of both type vehicles are combined, we find that total sales increased in July by 1.0 percent over the level of vehicle sales in July of last year. Comparing sales during the first seven months of 1996 with those for the same period last year we find that sales of cars were up 0.7 percent, sales of trucks were up by 6.7 percent, and combined sales of the two vehicle types were up 3.1 percent.

How does this compare with the performance of the economy as a whole? One way to look at this is to compare the year-to-date sales growth with the average growth of the Gross Domestic Product over the first half of the year. When we do this, we find that these two numbers are identical -- 3.1 percent. So, thus far this year, auto sales have been growing at the same rate as the growth rate of the general economy.

What does the second half hold? Some analysts say that sales of autos will slow along with a general slowdown in economic activity. The analysis in the preceding paragraph suggests that this might be so. Others say that the Olympics slowed down buyer traffic in July and that sales in the first half would have been better were it not for a shortage of supply of some popular models. They predict that both supply and demand will improve in the coming months. We'll just have to wait and see what happens.