US auto sales growth slips as Hurricane Sandy impact ends

Consumer demand

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US autos Mar13.pngCNN captured the world’s imagination when launching 24/7 television coverage of the first Gulf War in 1991. For the first time in history, viewers were able to see what happening as it happened. And CNN used expert and experienced commentators to make sense of the pictures.

Some of the major media still maintain these high standards, despite the cost. But today, most 24/7 coverage instead concentrates on the excitement of being first with the story, and forgets about the context. Thus most commentary on US auto sales has moved from euphoria to concern between December – February. As the chart shows:

• December’s sales (green line) were up 113k versus 2011
• January (red square) was up 130k versus 2012
• But then February was only up 41k

The December/January sales increases were seen as confimation that a strong economic recovery was now underway. They appeared particularly striking as they came during these seasonally weak months. But then last week’s February data cast doubt on this narrative.

Auto sales have certainly been improving over the past 18 months, as buyers needed to replace worn-out vehicles. But overall, this has been a replacement market, not a burst of new purchases. And this may well have been the case with the recent jump:

• It followed Hurricane Sandy, which hit the US East Coast in early November, and was forecast to require 250k cars to be replaced
• Is it therefore coincidence that sales jumped as they did in December-January by 243k?
• Or were these simply the forecast replacement sales for those damaged in the storm?

It they were replacing storm-damaged sales, then February’s slower pace would really be no surprise. We shall just have to wait till March’s report appears to find the answer.

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