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July 02, 2008

June Car and Truck Sales Skid to their Slowest Pace Since 1993
by Paul Kasriel

Seasonally-adjusted light motor vehicle sales fell 4.6% month-to-month in June to an annualized rate of only 13.6 million units - the slowest sales pace since January 1993 (see Chart 1). Had GM not slashed the effective prices of its fleet late in June, industry sales would have been even weaker. GM has announced that it will retain its nearly-giveaway incentives, which will likely prompt similar incentives by its competitors. So, inventories will be cleared out over the summer at the expense of profits. That bad news for the stockholders of auto/truck producers is good news for U.S. Treasury bondholders as the falling prices of motor vehicles will partially offset the higher price of energy.

Chart 1

In the second quarter, light motor vehicles sales contracted by an annualized 26.7% after contracting by 20.0% in the first quarter. In the two quarters ended Q2:2008, total light motor vehicle sales contracted by 23.4% -- the sharpest two-quarter contraction since the first quarter of 1987 (see Chart 2).

Chart 2

These are data straight from the horse's mouth, so to speak. These data will not be revised, they will not be "quality adjusted," and they are in unit terms. I have no idea how the bean counters at the Bureau of Economic Analysis will massage these data in the GDP accounts, but they show a motor vehicle industry in a deep recession to go along with a housing sector that remains in a deep recession.

Paul L. Kasriel, Director of Economic Research
The Northern Trust Company
Economic Research Department
Positive Economic Commentary
"The economics of what is, rather than what you might like it to be."
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The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.

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