Readers of this letter are familiar with its focus on residential real estate and its view that the economy won't be back to full speed until real estate recovers.
But new-vehicle sales are also symptomatic of the economy's ills. Households' impaired balance sheets limit their ability to buy new cars by borrowing more. Earlier this month the Commerce Department reported June auto sales of 11.4 million at a seasonally-adjusted annual rate.
New-Vehicle Sales
(Click on chart to enlarge)
(Recessions shaded)
The chart makes clear that recovery has stalled: 11.4 million is not part of an upward trend. A close examination of the data only exacerbates concern. New-vehicle sales peaked at 13.4 million in February and have been heading south ever since. Sales haven't been this low since an identical 11.4 million reading in August of 2010. There's been no progress over the last year.
It is possible that temporary factors such as the Japanese earthquake and tsunami have skewed the data. Time will tell. But all of us should be concerned that weak auto sales only confirm the economy's slack state.
(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.)
© 2011 Michael B. Lehmann
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