Tuesday, December 7, 2010

Half Full or Half Empty

The Lehmann Letter (SM)

Auto sales provide a good illustration of the current recovery's enigma.

As is the case for the economy as a whole, new-vehicle sales have rebounded strongly but are still a long way from robust health.

Examine the data: Go to http://www.bea.gov/national/index.htm#gdp, scroll down to Supplemental Estimates and click on Motor vehicles. Open the Excel file and click on the Table 6 tab at the bottom. Look at column I.

Notice that new-vehicle sales were running between 16 and 17 million at a seasonally-adjusted annual rate for a decade until 2007. By 2009 sales had fallen to the 9 millions. Now, in October and November of 2010, sales were up to 12.2 million. That's a gain of over 25%, but sales are still almost 25% below their earlier peak.

So, is the glass half-full or half-empty?

New-Vehicle Sales

Click on chart to enlarge.)

Recessions shaded

Examining the chart and updating it with the most recent 12.2 million sales figure helps a little but does not provide a complete answer. We will have to monitor auto sales regularly and carefully. If new-vehicle sales continue to improve at the current rate, they should be back to 15,000,000 by 2012. That would be close enough to complete recovery. But if sales plateau at a their current level, we will be disappointed.

That's why half-full/half-empty is a good metaphor for the entire economy. We'll stay tuned.

(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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