Wednesday, June 6, 2012

Autos Plateau

The Lehmann Letter (SM)

New-vehicle sales are crucial to the economy's recovery, and they appear to have stalled.

The chart shows 16-17 million sales annually from 2000 to 2007, and recovery from the recent recession initially looked strong. Sales climbed from under 10 million in the recession’s trough to 15 million earlier this year. But now they are hovering around 14 million and were only 13.7 million in May. That's not a good omen.

New-Vehicle Sales

(Click on chart to enlarge)

(Recessions shaded)

Household expenditures on homes and autos must return to a semblance of their pre--recession levels if the economy is to enjoy a full recovery. Problem is: Consumers’ weak balance sheets stand in the way. During the roaring 2000s households had no qualms about piling on debt and could easily refinance their homes to buy a new car. Those days are gone. Household assets are no longer appreciating and debt is a burden and new borrowing is difficult.

As a consequence new-home sales are stuck in an L shape, flat-lining at their recession levels. New-vehicle sales escaped that fate by rebounding swiftly. But now they are flat-lining below full-recovery levels.

Let's stay tuned to this important statistic and hope it breaks through the 15-million ceiling soon.

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© 2012 Michael B. Lehmann

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