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

By: Paul Kasriel | Wed, Jul 2, 2008
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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 Kasriel

Author: Paul Kasriel

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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Paul Kasriel

Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005. The accuracy of Paul's 2008 economic forecast was ranked in the top five of The Wall Street Journal survey panel of economists. In January 2009, The Wall Street Journal and Forbes cited Paul as one of the few who identified early on the formation of the housing bubble and foresaw the economic and financial market havoc that would ensue after the bubble inevitably burst. Through written commentaries containing his straightforward and often nonconsensus analysis of economic and financial market issues, Paul has developed a loyal following in the financial community. The Northern's economic website was listed as one of the top ten most interesting by The Wall Street Journal. Paul is the co-author of a book entitled Seven Indicators That Move Markets.

Paul began his career as a research economist at the Federal Reserve Bank of Chicago. He has taught courses in finance at the DePaul University Kellstadt Graduate School of Business and at the Northwestern University Kellogg Graduate School of Management. Paul serves on the Economic Advisory Committee of the American Bankers Association.

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