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July auto sales might be viewed as the first solid indicator of an improving U.S. economy. But what does it really tell us?
Americans bought 995,000 light vehicles in July, a 16% increase over June and the best monthly report since August 2008. Domestically manufactured light trucks (which includes SUVs) lost market share but still achieved an 8% monthly sales gain. Sales of domestic cars, imported cars, and imported light trucks were all up more than 20% month to month.
If we'd seen these kinds of numbers in the absence of the cash for clunkers incentives, I would have viewed it as a strong suggestion that the economic recovery has begun. As is, I'm left wondering, and fundamentally not knowing, whether the auto figures signal the shift we've all been watching for, or sales stolen from September and October and delivered to July.
Another favorable indicator came from yesterday's Manufacturing ISM Report On Business, whose July index was back up to 48.9. That's still shy of the 50% point at which there would be as many establishments reporting things are getting better as say they are getting worse. But it's much better than the very low readings we'd been getting previously.
On the other hand, disposable personal income, which had been trending up the past few months, dipped back down again in June.
So I wish we had something else besides the auto numbers that would indicate that things have started to get better rather than simply reassuring us that things are getting worse more slowly than they used to be. I'll be watching Thursday's unemployment claims and Friday's employment report with unusual interest this week. But Phil Rothman, like other forecasters, is predicting we lost another 350,000 jobs in July, or two to three times the number we'd need to add each month just to keep the unemployment rate from rising.
Posted by James Hamilton at August 4, 2009 08:20 PM
Re: The ISM report
The Production component is at 57.9%. And new orders is at 55.3%.
The recession is over. I think you should flip the little frowny face to at least something like this: http://img38.imageshack.us/img38/3053/samemoticon.gif
You don't want to be late.
Posted by: Steve at August 4, 2009 10:58 PM
'Cash for clunkers' was a total waste. It is better to let these phase-outs happen naturally.
Why not a 'cash for old PCs' program? Trade in your old PC for a rebate on a new upgrade!! The tech industry is not riddled with unions and government cronyism the way autos are.
If PCs are a stupid idea, how is it that doing the same for cars is not?
Posted by: GK at August 5, 2009 12:21 AM
Is the decline in DPI in June mainly payback for the stimulus-related gains in April & May? I believe the release said nominal PI x stimulus was down 0.1% in June after being flat in May (so still not good news).
Posted by: Sam at August 5, 2009 05:52 AM
At least while we continue to go "bumpty bump" at these low levels for a while, we won't be using as much gas.
We've got that going for us.
Posted by: beezer at August 5, 2009 06:25 AM
Have you looked for an analogy to the post 9/11 car deals that spurred new car sales for a short period on 0% financing deals?
Posted by: anon at August 5, 2009 07:03 AM
"If PCs are a stupid idea, how is it that doing the same for cars is not? "
PC's don't consume oil.
Posted by: anon at August 5, 2009 07:03 AM
I wonder whether some of the July bounce in car sales may have been in part postponements from June, in addition to frontloading from later months. People may have been waiting on DOT to issue the rules for the clunkers rebates. The cash-for-clunkers (CFC) bounce for July might also be overstated since people shopping earlier in the month may have postponed purchases in anticipation of the CFC program, which was only available the last few days of July. I suspect not all of those early July shoppers managed to squeeze their purchases into those few eligible July days and will be buying in August.
Posted by: Glenn at August 5, 2009 09:04 AM
"If PCs are a stupid idea, how is it that doing the same for cars is not? "
I think many states offer tax incentives for people to buy more energy efficient appliances and have been doing so for a number of years.
Not to mention the tax incentives in purchasing renewable power sources for your home.
Posted by: jay22 at August 5, 2009 10:08 AM
JDH,
Can you explain how these improvements in the rate of change for things such as auto sales or house sales, along with month over month improvements in ISM or leading indicators impact quarterly GDP numbers?
For example, if the composite leading indicators are improving, but still far below their peak, what does that mean for GDP, which is also below peak? Does it imply growth?
I have a hard time believing our GDP per capita is improving when we as a nation are producing, earning and trading less than we did 18 months ago.
Posted by: MikeR at August 5, 2009 10:11 AM
Anon said:
""If PCs are a stupid idea, how is it that doing the same for cars is not? "
PC's don't consume oil."
PCs are made of oil, and consumer electricity, which in many areas is a product of oil.
The comment here is running along the lines of "I don't like it, so it's bad." I'm not sure keeping our national obsession with cars alive is the right answer, any more than keeping the power elite in the financial industry tapped into Treasury is a good idea. But I really don't see much value in "I don't like it, so it's bad" cluttering up comments.
Posted by: kharris at August 5, 2009 10:16 AM
I am actually a bit surprised that the consensus number jobs lost in July is 350,000, considering it was 467,000 in June. Just curious what people here think may account for the substantial improvement in this number (the rising stock market cannot be having that much of an effect, can it?)
Posted by: jturner at August 5, 2009 11:31 AM
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