Tuesday, September 7, 2010

No Double Dip Yet

The Lehmann Letter (SM)

Last week this letter urged readers to follow residential construction and auto sales for a clue on the economy's direction.

You already know about the weakness in housing. So let's examine new-vehicle sales.

The Commerce Department reports 11.4 million new-vehicle sales in August at a seasonally-adjusted annual rate. (See the end of this letter for instructions on retrieving the data.) The report also reveals that sales have been flat in the 11-million range for about half a year.

Much has been said about the auto industry's rebound. Profits have recovered and General Motors will soon return to private ownership after a spell under the wing of the federal government.

New-Vehicle Sales

(Click on chart to enlarge.)

Recessions shaded

But the chart makes clear that a profit rebound is not necessarily a sales rebound. We have not returned to the 16-17 million range the industry enjoyed before the bubble burst.

In a way, this performance is a metaphor for the entire economy. Profits are back while the economy isn't.

That does not mean we are falling into recession. But it does mean that we are, at least for the time being, stuck on a low plateau.

New-vehicle sales won't send a signal that the economy has recovered until they grow back toward the 15-million range.

(To examine the data on new-vehicle sales……..

Go to http://www.bea.gov/ and then

Step 1: Click on "Gross Domestic Product" under "National"
Step 2: Scroll down and click on "Motor Vehicles" under "Supplemental Estimates"
Step 3: Save to your desktop as an Excel file and then open the file
Step 4: Click on the "Table 6" tab at the bottom of the page
Step 5: Look at column I (Light Total) and scroll down for the latest data)

(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2010 Michael B. Lehmann

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