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SAAR Sales of Motor Vehicles – Jan 2012 to Apr 2013

Since the Great Recession ended, the automobile industry has been driving economic growth and the recovery. After people postponed major product purchases, like new automobiles, during the recession, they had to make a decision to continue the repairs of their older vehicles or replace them. Prior to January 2012, the annualized rate of Motor Vehicle Sales was trending upward for 3 years. However, because of the volatile nature of this economic indicator due to dealership promotions, you need to look at the current trend line, which has been relatively flat and hovering between 500,000 Units plus or minus since January 2012. Is the auto industry recovery going to continue or not?

The annualized rate of change in SAAR Motor Vehicle Sales Rate has fallen in 2 of the last 4 months, possibly indicating a slowdown in consumer spending on this major Household purchase. We believe, however, this is partly due to the effective 2% tax increase with the expired social security tax cut on Jan 1, 2013. It will be interesting to see whether households will delay making a new auto purchase until the new model year.

The blip on the radar screen in November 2012 appears to be the seasonal nature of the new model year. New models are normally introduced in August each year, but it may have taken consumers 3 months to make this major purchase buy decision during 2012. In any event, the effective 2% tax increase should be over now and sales should be normalized over the next 2 quarters, hopefully rising again in the 3rd Quarter 2013.

To determine whether consumers will remain cautious in making major buy decisions during 2013, we need to look at Consumer Confidence and Sentiment levels. In my next post on Monday, June 10th, we will do just that.







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