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Daily Global Commentary

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

Wed, Jul 2 2008, 22:23 GMT
by Paul Kasriel

Northern Trust

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

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.

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.

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.

Factory Sector – Orders and Shipments Remain On the Weak Side

Orders of factory goods rose 0.6% in May, following hefty gains of 1.5% and 1.3% in March and April, respectively. The strength in the headline reading is largely due to orders of non-durables, which have been artificially raised by higher prices for energy items. In each of the three months ended May, shipments of petroleum refineries have grown 10.7%, 8.1%, and 4.1%, respectively. Orders of durable goods held steady in May after posting declines in March and April. Shipments of factory goods rose only 0.1% in May, reflecting a 1.2% gain in shipments of non-durables and a 1.6% drop in shipments of durables. On a year-to-year basis, orders and shipments of durable goods show noteworthy weakness.

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Published on  Wed, Jul 2 2008, 22:26 GMT

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• Jobless Claims – Is the Recession on its Last Legs?
  Published On Thu, Sep 4 2008, 21:10 GMT
• Comments on Mr. Marsden in The Wall Street Journal
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  Published On Tue, Sep 2 2008, 23:37 GMT
• Consumer Spending: Strong Likelihood of Decline in Q3
  Published On Sun, Aug 31 2008, 23:49 GMT
• Q2 GDP Is History, Focus Should Be on the Future
  Published On Thu, Aug 28 2008, 22:40 GMT

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