I Know What the Economy Did Last Summer Part 1 : Carmageddon and the Retail Apocalypse

http://thegreatrecession.info/blog/know-economy-last-summer-part-1-carmageddon-retail-apocalypse/

Summer closed in a whirlwind of weather chaos for the United States and its territories. At the start of the summer, the US economy began to show signs that it was flying apart. The two most obvious were the big blowouts in the auto industry and in retail, not all of which could be attributed to a shift to online sales.

Carmageddon crashes on

The auto industry rolled over this year and began a decline similar to the one we experienced at the start of the Great Recession. (See “Carmageddon Crashes into ‘the Recovery’ Right on Schedule.”)
In response, car markers started offering record incentives (like $0 down, 0% interest on a 80-month loan), which brought an improvement to sales in July. You have to ask, just as I did back in 2007, “What is the end game when such incentives take profit down to nil?”

Used car prices, on the other hand (not having such major incentives), plunged to their lowest level since 2009. New car prices have also fallen all year (as another part of the major incentives) and dropped almost a thousand dollars on average just between June and July (as part of the incentives package).
Even with such pricing and financing incentives, one firm, SouthBay Research, threw cold water on the Census Bureau’s July sales report, declaring the figures “unbelievable.”

Over the summer, delinquencies also spiked on “deep sub-prime auto loans” (now matching — like so many other things in the auto industry — their crisis-era milestone from 2007). Delinquencies rose across all credit scores, but these things always hit worse at the bottom and eventually work their way up. Is it any wonder “deep sub-prime” delinquencies are up, given the old 2007 tricks that dealers and financiers began offering this summer as yet another incentive?