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A Car-Sales Indicator Suggests a Recession Is Near or Already Here
By FLOYD NORRIS
Published: August 19, 2006
IF things are miserable for America’s new-car dealers, can a recession be averted? History says it cannot and suggests a downturn may have already begun.
The accompanying chart shows the rate of change in sales by new-car dealers, comparing the most recent 12 months with the 12 months before that; it is adjusted for inflation. The rule — unveiled here for the first time — is that if the figure is down 2 percent or more, a recession is either under way or set to begin within a few months. The figure fell to a negative 2.4 percent when June sales figures were released last week by the Census Bureau.
The available data go back to 1968, a period in which the American economy has recorded six recessions. The “dealer doldrums indicator,” as we will call it, called five of them, missing the 1981-82 recession only because it was not persuaded that the 1980 downturn had ever ended. It has never warned of a recession that did not occur.
The risk of using 12-month figures is that by the time bad news is clear from new-car sales, it can be overwhelmingly obvious from other economic indicators. But such long periods avoid the possibility of false readings because of the volatility of new-car sales.
The chart measures all sales by new-car dealers, which is how the retail sales statistics report the data. So it includes their revenue from used-car sales, parts and service. But it does not include sales by dealers who sell only used cars or repair garages that are not also car dealers.
New-car dealers, according to Census Bureau officials who compile the data, typically generate about half their revenue from selling new cars, a quarter from selling used cars and the rest from sales of parts and from repair and service. So we constructed a new-car-dealer inflation index based on the consumer price indexes for those categories and used it to make the figures comparable, since inflation varied widely over the period.
The accompanying table shows that the indicator sounded two months before the 1980 recession began, but otherwise went off after downturns had started but before they had ended. In some cases, a recession was indicated before it was officially recognized by the National Bureau of Economic Research.
No indicator is perfect, of course, and this one was developed knowing when the earlier recessions had occurred. But it makes sense, in part because there are often cheaper alternatives to new-car dealers, whether for service or for buying used cars that may be older or have more miles than the preowned vehicles that new-car dealers feature on their used-car lots. So such dealers are likely to lose market share when times turn bad.
If a recession is under way, this economic recovery will have been the least beneficial one ever for the new-car dealers. The best inflation-adjusted year-over-year increase in their revenue during the recovery was 6.9 percent, far below the peaks of other recoveries.
There is, of course, no mystery now as to what the problems are for car dealers. They are pinched by the slumping real estate market because people can take less money out of home equity to buy cars. And soaring gasoline prices have made driving much more expensive and new-car payments more burdensome. In July, sales at gasoline stations accounted for 10 percent of all retail sales, the highest figure in decades.
Dealers are hurting. The rest of us may soon share their pain.
Graphic: Annual Change in Car Dealer Sales:
Geändert von Benjamin (15-02-2013 um 21:12 Uhr)
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