Tuesday, September 04, 2012

U.S. Auto Sales Reach 4.5 Year High in August

As predicted several weeks ago by J.D. Power based on the first 16 selling days of August, U.S. new car sales did reach a four and-a-half year high last month.  Slightly more than 14.5 million units were sold in August (at an annual rate, seasonally adjusted), which was an increase of 20% from a year earlier (exactly as predicted by J.D Power), and the highest sales month since March 2008.  By individual auto company, Honda had the largest annual increase of 59.5% in August, followed by Volkswagen at 48.2%, and Toyota at 45.6%.  Chrysler led the Big Three with a 14.1% increase, followed by Ford's 12.6% gain and GM's 10.1% increase.  On a year-to-date basis, U.S. auto sales are 14.7% above last year.  

Auto sales in August marked the third time this year that monthly sales exceeded the artificially high sales during the "cash-for-clunkers" taxpayer-funded stimulus in August 2009, and August sales were the highest since the very early days of the recession.  Based on actual new vehicle purchases by consumers, in contrast to how they might respond to national surveys, consumer confidence is at the highest level since early 2008, and there is nothing here in today's report to suggest a serious slowdown or recession.

25 Comments:

At 9/04/2012 3:21 PM, Blogger Jon Murphy said...

According to TrueCar.com, average transaction prices rose in August and incentive spending fell, indicating higher demand for vehicles.

 
At 9/04/2012 3:34 PM, Blogger Bill said...

Hard to resist no money down and zero per cent financing for 60-72 months. We'll see if that lasts.

 
At 9/04/2012 3:38 PM, Blogger Jon Murphy said...

See, that's the thing, Bill. That sort of stuff is incentive spending and that is falling.

 
At 9/04/2012 6:16 PM, Blogger Henry H said...

The incentives aren't as good this year. I got 2.99% from the credit union. Dealer was offering 4%. He lowered it to 2.90%. I told them to take a hike.

 
At 9/04/2012 6:57 PM, Blogger Cabodog said...

And, no mention of the blip that was the cash for clunkers program? Interesting that auto sales are solidly surpassing that short-lived stimulus.

At least it got a lot of Obama bumper stickers off the road.

 
At 9/04/2012 7:53 PM, Blogger Hydra said...

How do you have a long lived stimulus?

 
At 9/04/2012 7:56 PM, Blogger Hydra said...

Some people are saying it is because the only jobs people can get are cutting grass, moving, and hauling firewood.

Job snobs. There are a lot of successful businesses hiring a bunch of people to do those jobs, and a lot of other jobs that use pick-ups.

MP has noted previously the pick-up truck index. this is a godd sign, regardless of the other underlying incentives. The people and companies that offer incentives are, after all, incentivised to give them.

It is all part of the market.

 
At 9/05/2012 7:43 AM, Blogger Jon Murphy said...

By the way, in case anyone is wondering what the non-seasonally adjusted numbers look like:

Light vehicle retail sales (as reported by Wards Auto) had the strongest August since Cash-for-Clunkers back in 2009. August sales were 19.9% above August 2011. Annual sales surpassed the 14 million mark for the first time since October 2008. Annual sales are up 13.2% from the same 12-month period last year, the fastest annual growth rate in 22 years.

 
At 9/05/2012 10:41 AM, Blogger VangelV said...

I would not get very excited. It was not that long ago when consulting groups were predicting 16.5 million sales for 1012. They were wrong because economic activity is much lower than projected.

 
At 9/05/2012 11:03 AM, Blogger Jon Murphy said...

Ah, a new kind of pessimism! It can't be good because other people made bad predictions.

 
At 9/05/2012 11:21 AM, Blogger Mark J. Perry said...

Jon:

I think it works like this:

1. Bad news is bad news. Self-explanatory.

2. Good news is always really bad news somehow, because there is only one kind of news: bad.

 
At 9/05/2012 12:46 PM, Blogger Jon Murphy said...

To go back to your weather metaphor:

"Although it's sunny and 72 degrees, it's not actually that good of a day because Channel 7 said it was going to be 80 degrees."

 
At 9/05/2012 3:10 PM, Blogger VangelV said...

Ah, a new kind of pessimism! It can't be good because other people made bad predictions.

Not at all. I am simply pointing out what you and Mark have argued all along whenever bad news came around; a few data points do not make a sustained trend.

When the US is running massive deficits, the debt went up by 50% in the last four years, and unfunded liabilities stand at more than $100 trillion as the biggest proportion of the population ever is on food stamps and more than 20% are unemployed, underemployed, or discouraged it is hard to get excited about a picking in auto sales during a period of low interest rates and the highest fleet age in history.

 
At 9/05/2012 3:12 PM, Blogger VangelV said...

I think it works like this:

1. Bad news is bad news. Self-explanatory.

2. Good news is always really bad news somehow, because there is only one kind of news: bad.


No Mark. All data needs a proper theory to make sense of it.

 
At 9/05/2012 3:24 PM, Blogger Jon Murphy said...

I am simply pointing out what you and Mark have argued all along whenever bad news came around; a few data points do not make a sustained trend.

Correct, sir. But annual light vehicle retail sales have been rising consistently for 34 months now (Ward Auto data). That is more than just a few data points.

 
At 9/05/2012 3:34 PM, Blogger Jon Murphy said...

Not going to lie, I find it funny that you want to lecture me about using one data point, and then say "you must discount three year's worth of data points because of my one point that interest rates are low!"

Well, the interest rate thing doesn't hold water. Automobile interest rates grew 25% over the past year and are at pre-recession levels.

 
At 9/05/2012 3:37 PM, Blogger VangelV said...

Correct, sir. But annual light vehicle retail sales have been rising consistently for 34 months now (Ward Auto data). That is more than just a few data points.

But isn't the fleet older now than 34 months ago? The fact that old vehicles are cheaper to replace than fix is not the basis for a sustained recovery. The Cash for Clunkers has certainly reduced the number of viable vehicles in the used car market and has forced some extra sales of new vehicles. The greater population also should push demand higher. When I see GM stuffing the pipeline, idling lines of vehicles that are not selling a fraction of what was expected, and going to the market to get $8 billion in financing I tend to be bothered by the smell and look for something other than a feel good story.

 
At 9/05/2012 3:45 PM, Blogger Jon Murphy said...

General Motors accounts for about 15% of the domestic sales market. They do not have the market share to drive these kind of numbers. Their sales, while improving do not account for the gain over the past three years.

Look, GM does not have the kind of power you think it does. 1 in 7 vehicles sold in the US are GM. They cannot possibly account for the rise in retail sales.

 
At 9/05/2012 3:48 PM, Blogger Jon Murphy said...

Look, GM sales account for about 15% of the domestic market. On the Production side, GM makes about 10% of vehicles manufactured in the US (the difference is made up in imports from Canada and Mexico). They simply do not have the market share or power to tip the scales as much as you think they do.

Can we please move past this GM conspiratorial bull honkey?

 
At 9/05/2012 3:52 PM, Blogger VangelV said...

Not going to lie, I find it funny that you want to lecture me about using one data point, and then say "you must discount three year's worth of data points because of my one point that interest rates are low!"

Interest rates have been held at an artificially low rate more than a decade. The basis for my argument is the folly of central planning by the Fed as it tries to determine what the 'right' interest rate is in an attempt to 'guide' the markets.

Well, the interest rate thing doesn't hold water. Automobile interest rates grew 25% over the past year and are at pre-recession levels.

You can still get zero interest loans or low interest loans with little down. And I have seen 60 month loans given away by desperate dealers who are trying to unload inventory.

I still go back to fundamentals. The fleet is old. That means that there is a natural replacement cycle that tells us nothing about the true state of the economy or the industry. (And is vulnerable to external shocks of the type that we are likely to see after the election.)

More than 20% of the working population is unemployed, underemployed, or given up looking for a job. Corporate revenues have not grown very much recently. Corporate earnings are turning down. There are more people on food stamps than ever before. Under Obama the US saw more people take disability than find newly created jobs. The bond market bubble is huge at a time when states are running short of revenues, municipalities are defaulting, and the federal government has unfunded liabilities and debt that exceed $100 trillion. And last but not least, my canary stocks are turning up sharply and signalling big trouble ahead for fiat currencies.

 
At 9/05/2012 3:59 PM, Blogger VangelV said...

General Motors accounts for about 15% of the domestic sales market. They do not have the market share to drive these kind of numbers. Their sales, while improving do not account for the gain over the past three years.

You misunderstand me. I am not saying that GM's channel stuffing is causing the numbers to indicate a false picture. I am only pointing out that GM is still in big trouble and at the brink if it does not change course. (That said, if takes action by idling many of its domestic plants, close down the EU money losing operations, and concentrate on markets and activities that are profitable the company could be a steal.)

My point is a bigger one. Not long ago analysts who had looked at the effect of the Cash for Clunkers, the age of the fleet, and the changing demographics were predicting more than 17 million vehicles being sold next year and around 16.5-16.7 million vehicles this year. The 14 million annualised sales figure signals a much weaker than expected economy. That is not good news no matter how much Mark tries to spin it. We SHOULD have had much bigger sales even if the recovery was relatively weak. From what I see the numbers are telling us that the economy is going at stall speed at best.

I hope this is a bit clearer.

Look, GM does not have the kind of power you think it does. 1 in 7 vehicles sold in the US are GM. They cannot possibly account for the rise in retail sales.

As I wrote above, that was not the point I was trying to make. I merely pointed out that after accounting for all of the factors a decent economy would have produced more than 16 million sales.

 
At 9/05/2012 4:13 PM, Blogger Jon Murphy said...

See? This is the pessimism thing I was talking about earlier.

This cannot be good news because someone else made a bad prediction?

That doesn't even make sense.

This is what I don't understand about you. Things are not as good as you want them, so we've made zero progress? No. That just doesn't make sense. The fact is, auto retail sales is at the highest level since October 2008 and rising at a double-digit pace. Just because it is less that what you want doesn't mean it is bad. It means your expectations were wrong.

The problem is not that the data is bad or misleading. It's that you are a poor forecaster.

 
At 9/05/2012 4:34 PM, Blogger VangelV said...

See? This is the pessimism thing I was talking about earlier.

This cannot be good news because someone else made a bad prediction?


No. It is bad because a decent recovery would require that 16 million vehicles are sold. The fact that there are only 14 million even though we have had rates at artificially low levels signals a weakness in the economy that you and Mark are ignoring.

Let me restate the point again. Given the demographics, the age of the fleet, and the effect of Cash for clunkers you need to sell 16 million. Period.

 
At 9/05/2012 4:43 PM, Blogger VangelV said...

That doesn't even make sense.

Think of it this way. You have a child that has grown two inches over the past two years. While the increase is good, if his peers grew seven inches during the same period there might be a problem.

As I wrote above, given the destruction due to the Cash for Clunkers program, the artificially low rates, the age of the fleet, and the increase in the population we expected a recovery to produce sales of 16.5 million vehicles. The increase to 14 million is better than the lows but it is not enough to signal a healthy recovery.

Got it yet?

This is what I don't understand about you. Things are not as good as you want them, so we've made zero progress?

As I want them? No. I only see things as they are. If a recovery requires sales of 16 million that is what would signal that it is taking place. If sales fall short you may have an improvement but you do not have a recovery. Now I know that I do not always pay attention to my words and may write down things badly but I am pretty sure that the argument is logical and self explanatory. If your child has grown to be a tall midget it is still a midget. It is not the growth that matters at much as it the level that has been reached.

No. That just doesn't make sense. The fact is, auto retail sales is at the highest level since October 2008 and rising at a double-digit pace. Just because it is less that what you want doesn't mean it is bad. It means your expectations were wrong.

But you have a bigger population. You have a fleet that is very old and in need of replacement. You have taken away vehicles from the used vehicle market by the destructive Cash for Clunkers program. The increase is OK but for it to signal a recovery you need at least a million and a half to two million more sales. As I wrote above, a child can grow and still turn out to be a midget. So can an economy.

 
At 9/05/2012 5:26 PM, Blogger VangelV said...

The problem is not that the data is bad or misleading. It's that you are a poor forecaster.

The problem is that you are looking at tall midgets and assuming that things are normal.

As I pointed out, we know the age of the fleet, the increase in the population, the reduction in the number of useful used cars by the Cash for Clunkers program, and what a normal sales growth is when coming out of a recovery. Put it all together and you have a projection of 16.5 million vehicles for 2012. Instead we get 14 million and you and Mark are cheering.

But this is not just me making this case.

Analyst Jeremy Anwyl, vice chairman of Edmunds.com, said those numbers will be welcomed by Barack Obama's re-election campaign. But he questioned their value.

"The auto industry always has a very strong bounce coming out of a recession, and this one is actually a little bit weaker," Anwyl said, challenging the administration's claims that its bailout of GM and Chrysler is responsible for the rebound.

"What's propping it up is that the manufacturers are getting very creative with their incentives. If you culled that support, you'd see a decline. I don't see the market as stable or upward ticking."


 

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