The Big 3 U.S. automakers continue to get a little less big.
U.S. auto sales plummet, declare the headlines. Ford led the retreat with their light truck sales (a category that includes the now less-fashionable SUVs) for July down 45% from last year. Of course, those July-to-July comparisons are particularly misleading due to the enormous sales spike that resulted from last year’s discount programs at GM and Ford. Still, the number of domestic light trucks sold for each month since gas prices came back up in March has been lower than for the corresponding months of either 2004 or 2003, averaging 7% below the 2004 figures.
Domestic car sales, which did not share in the wild performance in the summer of 2005, exhibit a more modest declining trend.
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Though this is not what one would prescribe for an economy on its way down, it does not approach the magnitude of what we saw last fall. Domestic light truck sales in October and November of 2005 were down 20% from their values of 2003. That was a big enough shock to contribute -1.5% to total GDP growth (at an annual rate) for 2005:Q4. By contrast, the BEA reckons that the current slump in domestic autos subtracted a mere 0.1% from the 2006:Q2 growth rate.
By itself, the current slump in autos is not enough to derail U.S. economic growth. Unfortunately, it isn’t by itself. Whereas residential construction had contributed a full percent to last year’s 2005:Q2 GDP growth rate, the housing slump subtracted a bit less than half a percent from this year’s 2006:Q2.
That, too, is not a big enough number to bring the whole economy down. But one could easily imagine the problems in both autos and housing growing significantly in the months ahead. And if they do, we may have run out of excuses to ignore these sore spots.
And how about imports, you ask? Imported light trucks are holding their own,
and car imports are doing very nicely, thank you:
But idling previously productive American labor and capital, and replacing some of the lost output with more imports, is not going to help in terms of the very immediate challenge of maintaining output at its potential level.