Tuesday, 16 of July of 2019

Economics. Explained.  

Car and Truck Sales

July 3, 2019

Unit car and truck sales edged lower by 0.6% in June to a 17.3 million pace after having jumped 6.3% in May.  Sales have been volatile in recent months but during the last year car sales have rise 0.4%.  But the softness in car sales is not the result of an inability of consumers to afford cars.

Consumer confidence got hit late last year but it has recovered all of what it lost and stands at a lofty level which is consistent with consumer spending at about a 2.5% pace this year.

Confidence will remain solid simply because the economy continues to crank out 180 thousand jobs per month.  Steady growth in jobs means continuing growth in income.  At 3.6% the unemployment rate is at a 50-year low so almost everyone who wants a job has one.

Driven by the steady jobs gains, real disposable consumer income (what is left after taxes and inflation) is rising at a solid 2.3% pace.

Meanwhile, consumers have paid down tons of debt and are now in a position to spend.  At the same time, mortgage rates have fallen  1.1% to 3.8% in the past couple of months.  For all of these reasons we look for  2.6% GDP growth in 2019 after a 3.0% increase in 2018.  Thus, the consumer is in good shape to continue to spend at a brisk pace in 2019.

However, the reality is that many Americans, particularly younger Americans, are less enamored with owning a car than their parents.  Ones who live in larger cities have chosen not to own a car but to use ride-sharing services like Uber or Lyft.  At the same time Americans preferences have shifted away from sedans to SUV’s of varying sizes.  The car manufacturers are only now beginning to adjust production towards the different mix of cars being sold.  Thus, we expect car sales to remain fairly steady at roughly their current pace in the months ahead.

Stephen Slifer

NumberNomics

Charleston, SC


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