May 2, 2017

Opening the Bidding for 2Q17 GDP … (Update: April Auto Sales Weak, Especially for Traditional ‘Big Three’)

Filed under: Economy,Taxes & Government — Tom @ 2:27 pm

… we have the Atlanta Fed at an annualized 4.3 percent.

The current consensus seen at the link is 2.7 percent.

I see three things which support the kind of improvement the Atlanta Fed sees coming:

  • a repeat or improvement in fixed nonresidential investment, aka business investment, which would be a nice continuation of what we finally saw in the first quarter.
  • an increase in inventories, which I think would be an optimistic overreaction to how the economy is really doing.
  • a big increase in personal consumption expenditures, which is showing limited signs of taking shape. Additionally, I think the first quarter’s very low initial figures in this area will be revised up and will take away some of what might otherwise be a dramatic second-quarter improvement.

Update, 5:30 p.m.: Moody’s opening estimate for 2Q17 is an annualized 3.8 percent.

Update 2, 5:35 p.m.: April vehicle sales were down year-over-year by 4.7 percent. It would be tempting to completely pass that off as being a result of fewer selling days (26 vs. 27), and that Easter was in March last year and April this year, but I’m not buying that.

If there’s a silver lining, it’s that high-dollar light truck sales, which made up 61 percent of all sales, barely declined (-0.05 percent, rounded to -0.1 percent). The bleeding was all in car sales, which dropped by 11 percent. So the total revenue loss is probably closer to 3 percent compared to the unit volume decline of 4.7 percent.

Americans’ preference for SUVs and light trucks is obvious, and as long as gas prices remain tolerable, that’s not going to change. If we start seeing significant overall declines in that category, watch out.

Update 3, 5:55 p.m.: To be clear, though, the situations at the various manufacturers vary widely.

Looking at major changes in light trucks, General Motors saw a 5,800-unit decline vs. April of last year; Ford, -2,900; Chrysler, -5,100; Honda, -2,100.

That combined decline of almost 16,000 units was offset by gains at Toyota (+2,300), Nissan (+5,400, or 11 percent), Hyundai (+4,600, or 31 percent), Mazda (+4,200, or 40 percent).

Those are pretty big swings away from the traditional U.S. Big Three to the Japanese and Korean makers. If sustained, what we’ve traditionally described as “Detroit” in the auto business will be facing some serious difficulties.

For example, GM dealers, with 936,000 unsold vehicles, need 100 days sales to sell off those cars at current sales rates. The industry standard is supposed to be 60 days.


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