The weak performance of auto sales continues, with a new twist.
We closely follow automobile sales as one of the key early indicators of how much of an economic impact there may be from consumer concerns over income and gasoline prices. U.S. auto sales have been weak for much of the last year, with total vehicles sold in the U.S. 2.5% lower in 2007 than in 2006. The pace of the decline accelerated slightly last month, with December-to-December sales down 2.9%.
Although this has become a familiar story, there is one interesting new development. For some time the trend has been that while total vehicle sales fell, sales of imported vehicles rose. Something curious happened last month, however, in that vehicles manufactured in North America actually gained market share relative to the imports.
|Monthly (Dec 2007|
over Dec 2006)
|Domestic light trucks||-3.5||-3.2|
|Imported light trucks||+3.1||-3.9|
Particularly noticeable were car imports (a category that excludes SUVs, which are counted among the light trucks). Sales of imported cars were up 1% for the year, but down 7.9% December to December, in perhaps another indication that the depreciation of the dollar is having some effect. If this proves to be a new trend, it’s quite a welcome development. To the extent that some of the declining demand falls on imports, it mitigates the contractionary influence of the declining automobile demand, and is at least a step in the right direction for the huge current account imbalance.
Detroit is also trying to improve fuel economy, with GM dropping its plans for a new V8 engine and
Ford announcing a new engine technology to improve fuel economy by 20%. But it’s not clear whether any of these developments will be enough to keep the domestic auto industry afloat. You can buy Ford stock now for a little over $6 a share.