Tuesday, 26 of September of 2017

Economics. Explained.  

Car and Truck Sales

August 2, 2017

Unit car and truck sales rose 0.6% in July after having declined 0.6% in June.  The annual rate is 16.7 million which is 6.0% behind the pace for July of last year.  Clearly, sales have been soft for the past several months, but car sales are notoriously volatile and we are reluctant to believe that this represents a change in trend for a variety of reasons.

First, home sales remain robust.  Because car and home sales are the two biggest ticket items in a consumers budget, it is not surprising that a change in trend will be evident in these two categories first.  If home sales are holding up, car sales should do the same.

Second, the stock market is close to a record high level.  That is an indicator of investor sentiment.  A rising stock market also boosts consumer net worth.

Third, all measures of consumer confidence are close to their highest levels thus far in the business cycle.

Fourth, tax cuts to both individual and corporate income tax rates are likely in store later this year or in 2018.

And, finally, consumers have paid down tons of debt and are now in a position to spend.  Jobs are climbing at a pace of 170 thousand per month.  The unemployment rate has fallen to a level that is below the full employment mark.  Consumers are benefiting from stable and still low gasoline prices. For all of these reasons we look for steady 2.3% growth in 2017, and 2.8% in 2018.

There is simply no reason to believe the drop in car and truck sales in the past few months is a harbinger of slower growth in the months ahead.

Stephen Slifer


Charleston, SC

Leave a comment