Wolf Richter: The Next Tire To Drop On The US Economy | naked capitalism

Wolf Richter: The Next Tire To Drop On The US Economy | naked capitalism


Auto sales in the US have been hopping for the last few years, and production has soared, and exuberance along with it, and there were even hopes that sales would soon be where they’d been before the crisis, before the bankruptcies, the plant closures, the job destruction, the bailouts. Through August, it looked like it could happen. August sales hit a seasonally adjusted annual rate (SAAR) of 16.09 million new vehicles (Motor Intelligence), which is close to where sales had been before the crisis.
The auto industry plays an outsized role in the US economy, in manufacturing, services, and retail (accounting for nearly 20% of total retail sales). Booming production and sales have been pushing economic growth when hardly anything else was.
Then came September and October and the government shutdown and the taper or whatever, and the SAAR dropped to just over 15 million vehicles in both months, and unsold inventories piled up. But it wasn’t time to get nervous. It would be just a blip. Sure enough, in November, sales jumped to a rate of 16.4 million units, and everyone breathed a sigh of relief: there’d be no slowdown; the party would go on.
Then the December debacle happened. Inventories were already high when sales dropped to a SAAR of 15.4 million vehicles. It brought actual sales for the year down to 15.6 million units. This time they blamed the snowstorms and the polar vortex and whatever, and true, no one in his or her right mind goes out to buy a car during a snow storm, but snowstorms happen every winter, and the weather was beautiful in other parts of the country, including much of the West Coast.