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.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
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