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August 02, 2007

2007 Car and Truck Sales - Perhaps Detroit Would Welcome A Strike?
by Paul Kasriel

Despite hefty incentives, light motor vehicle sales in July were down month-to-month for the seventh consecutive time this year. Sales crept along at an annual pace of only 15.54 million units. Excluding Katrina-dampened September 2005, this was the weakest monthly sales rate since June 2004. In the first seven months of 2007, light motor vehicle sales are down an annualized 12.03% -- the weakest July-over-December sales rate since 2003 (see table below). Perhaps Detroit would actually welcome a strike by the UAW this September so they could cut costs and clean out some inventories!

Motor Vehicle Sales
Year	July/December Annualized Growth in Light Motor Vehicle Sales
2007	-12.03%
2006	0.75%
2005	28.22%
2004	-2.27%
2003	-13.22%
2002	17.00%
2001	13.09%

On a year-over-year basis, it wasn't just the former Big Three that experienced falling sales - even Toyota and Honda posted declines, too. This suggests that something fundamental is going on with the venerable U.S. consumer. He and she are tapped out. Second-quarter's 1.3% growth in real personal consumption expenditures is looking more and more like the new reality. Let's see, housing still is in the tank, consumer spending has downshifted significantly and business spending on equipment is barely growing. It's all good, mate. The remaining 17% of GDP is sure to soar enough to get economic growth back to potential, right? Don't bet on it.

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."
50 South LaSalle Street, Chicago, Illinois 60675

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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