Tuesday, July 2, 2013

Strong vehicle sales

June light vehicle sales handily beat expectations (15.9M vs. 15.5M), providing yet more evidence that the economy continues to recover. Since the low point in early 2009, vehicle sales have risen by an impressive annualized rate of 14%: over four years of strong double-digit growth

Sales of domestic cars and light trucks are up at a 16.6% annualized pace since their low in early 2009.

What's good for the auto industry is good for the whole economy, especially when sales and production exceed expectations for four years running—lots of trickle-down effects.

This is unambiguously good news.


Benjamin Cole said...

I agree that bigger auto sales are good news. But...

It is a misnomer that an increase in sales in any particular sector somehow boosts the whole economy. The whole economy responds to aggregate demand.

Aggregate demand remains feeble, a result of poor regulatory policies, a dubious fiscal policy and a Fed that is determined to keep a monetary noose around the economy's neck.

Notice how Bernanke continually discusses when to "taper down." He never discusses the option that he should "taper up."

The markets notice, and respond accordingly.

mmanagedaccounts said...

Come now, Benjamin, you've been ranting against the Bernanke Fed for years, accusing it of not being accomodative. At the same time, I read economists like Brian Wesbury who accuse the Fed of being accomodative. As you know, both of you cannot be right.

I know there are trillions of dollars of excess reserves not being loaned out by banks, but is that the fault of the Fed?

I think we could have better, more effective economic stimulus from the fiscal side of government, not monetary.

I think if workers are allowed to keep $50-$500 more per month of their own money, they'd likely spend it, providing a huge benefit to the growth of the economy, and in the aggregate increase payments to Washington.

May I respectfully request that from time to time you explain how it is that the Fed is not being accomodative. I do appreciate your persistent and faithful comments on this most excellent blog.

Benjamin Cole said...


I enjoy your commentary as well, and of course, that of our fearless leader, Scott Grannis.

That the Fed is not being accommodative is shown by inflation--latest read 0.7 percent, y-o-y on the PCE, and in real economic growth, still sluggish.

Remember, the Bank of Japan went to zero interest rates back in the 1990s, and yet the yen appreciated for decades. Being at the zero lower bound is not accommodative. It just means you cannot go lower.

As for QE, I contend it should be larger, and should also "taper up" as long as certain inflation and unemployment measures are not met. The market should know that "tapering up" is very much an option.

Right now, why does Bernanke constantly harp about "tapering down" when in fact we are recording the lowest rates of inflation in 60 years? You realize Volcker declared victory when inflation was brought 5 percent?

Yes, better regulations, yes, cut taxes on people who will spend their cuts, yes balance the federal budget. Wipe out the USDA, btw.

But we had a cruddy tax code and regulatory code in the boom-boom 1990s, and even worse in the 1960s.

The different between those two decades and present we had a growth-oriented Fed in the 1960s and the 1990s.Now the Fed is suffocating our economy.

Again, I totally agree with you that tax cuts should be honed in on the middle class. The GOP does itself no favors when it constantly suggests tax cuts that just happen to flow to the top of the economic period--especially now, when we have capital gluts, and trillions of dollars of undeployed capital just in banks.

There is no shortage of capital now, the old and at one time sound rationale for tax cost for the wealthy. We have capital gluts.

Print more money.

Benjamin Cole said...


BTW, the above post says that on a per capita basis real durable goods sales are down nearly 40 percent from 2000 peak.

An interesting take on things.