US auto sales growth slows as Hurricane Sandy impact ends

US autos Apr13.png250,500 US autos were destroyed during Hurricane Sandy last November, according to official data from the National Insurance Crime Bureau. Their replacement was clearly going to have a big impact on auto sales for the following months. Yet strangely, the blog has seen no discussion of this impact. So it has made its own calculations as follows:

• It assumes the replacement cars were bought between December – February
• Total sales in these months were 3.589m, compared to 3.305m 12 months earlier
• The sales increase was thus 284k, of which 251k were hurricane replacements
• This was a 1% sales increase, compared to the widely reported 8.6% growth

A 1% sales increase would not, of course, have made many headlines. It would certainly not have convinced most people that US auto sales were well into recovery mode.

March data (red square) confirms the real trend. It shows sales were up just 3% versus 2012, despite a number of positive factors:

Credit remains easy to obtain for auto purchases
• The average loan is now for a record 65 months, as buyers remain short of cash
• Gasoline prices fell in March – counter to the trend of the past 10 years
• Tax refunds during the month worth an average $3k helped pay for deposits
• Average sales incentives were up 11% versus 2012
Chrysler’s incentives were up 30% to $3228
• Incentives on some pickup models were worth between $5800$7500

The auto sales data thus provides no reason to believe that consumers have somehow become more confident about spending. 90% of households have seen their incomes fall since June 2009, and the impact of the sequester on government jobs is set to grow. Whilst today’s longer loan periods will eat into future sales.

Sadly, therefore, the idea that a strong auto sales recovery is underway is as much wishful thinking as the widespread belief that housing is also in recovery mode.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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