250,500 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.