I hate to say “I told you so,” but I did.
With a disaster on its hands, the current administration stepped up to the plate to offer an incentive program, similar to Germany’s, in order to boost the auto sector. Thankfully, it worked.
Now it appears that many are excited that the Cars for Clunkers program has done so well in the U.S., but they are forgetting last year’s “August rush.” This was one of the precursors to last September and October follies.
Source: Usingmyhead.com
For the past six months it has been eventful to watch the annualized sales index hover in between nine to 10 million. Thanks to the Clunker program, there was a last-minute boost in July sales and we have seen August rake in some serious gains.
July stepped up from those ghastly numbers and raised the SAAR to approximately 11.2 million, while August saw a significant jump to just over 14.5 million.
Here is the problem: these numbers are distorted and although the market seems to have an idea that there is a bit of inflation due to the incentive program, there is not a real sense of where the numbers will land. However, some analysts have made approximations.
In a BNET-syndicated Reuters article, Barclays analyst Brian Johnson checked in:
"We expect sales for the remainder of the year to fall well below August results, but believe momentum from the program as well as the stabilization in the economy and improvement in consumer confidence could boost sales above the 9.5 million average seen in the first half," Johnson said.
Source: Flickr
Another point to consider is that now that the CARS program is over and soon-to-be housing incentives will cease shortly, there could be a “veil” protecting the U.S. economy for the short-term. Once the effect from the programs wear off, could the economy begin to slip again?
After all, it does not appear that employers are adding jobs.
According to the latest from Challenger, Gray & Christmas, the leading outplacement consulting firm, although August showed the second lowest levels of job cuts for the year, it does not mean that the economy is out of the woods yet.
John Challenger, the chief executive officer of Challenger, Gray & Christmas, said in a recent press release, “The next four months will be very telling about the state of the job market. The final four months of the year are typically among the heaviest for downsizing.”
Challenger further insists that this does not necessarily mean 2010 will begin with robust hiring. If anything, it could make employers more cautious with their candidates. Essentially, the king of job cuts is hinting that we could have a slow recovery.
Taking these factors into consideration, it appears that we will see the SAAR data return to the 10 – 11 million range. Unfortunately, the economy is not strong enough to carry auto sales any higher, and without an incentive program, new car sales are going to remain hit relatively hard.
~nz
rp
Want to stay updated?
Keep up with us at twitter.com/rposluszny
Posts
