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James Hamilton of Econbrowser Sep 7, 2008 Email this article to a Friend  Printer friendly page

August auto sales were less dismal than July. But don't uncork the champagne quite yet.

The New York Times reports:

Domestic sales declined by 15.5 percent in August compared with the previous year, the fifth consecutive month of double-digit declines, despite some relief in recent weeks on gas prices.

I like to look at these data using graphs like the ones below, to help distinguish seasonal and cyclical factors from trend. (By the way, Econbrowser remains the only site on the web, to my knowledge, where you will find the auto data displayed this way.) You can make year-on-year comparisons by looking across entries within any given set of columns, and see month-to-month changes by looking across groups of columns.

Data source: Wardsauto.com

Sales of light trucks (which includes SUVs) manufactured in North America were clobbered this summer, and August 2008 was down 22% from August 2007. But August domestic truck sales were up 23% compared with July 2008, and you can't describe any significant chunk of that July-to-August improvement as a typical seasonal movement.

Data source: Wardsauto.com

August sales of domestic cars were down 12% year-over-year but up 6.6% month-over-month. The dramatic drop in gasoline prices thus appears to have reversed some of Detroit's hemorrhaging.

U.S. average retail gasoline price. Source: NewJerseyGasPrices.com.

Spencer at Angry Bear is encouraged by the uptick in seasonally adjusted auto sales and wonders if we've passed the bottom. The NYT quotes analysts from GM and Ford as cautiously optimistic.

I am less so. For one thing, even though gasoline prices are lower than they were a month ago, they're still much higher than the last time you bought a car. The swing away from SUVs is in my opinion inexorable, and will continue even if we see, as we may well, significant further declines in oil prices. And there is no way that works to the benefit of the American companies whose market strength has always been in the less fuel-efficient vehicles.

Second, if I'm reading things correctly, the U.S. economic downturn can now be classified as a recession. I don't share the views of those who think we may have seen the bottom there, either. Exports, the key sector that's been keeping GDP growth positive, are significantly threatened by a slowing world economy. And have we turned the corner on the financial mess? If that's how you read the latest developments with Fannie and Freddie, then God bless your cheerful spirit.

I'm expecting job and income losses to continue, and that doesn't bode well for auto sales, no matter what's been happening or may be about to happen to gasoline prices.

by James Hamilton (Econbrowser)

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