My Photo
Note: Jeff does not accept guest blog posts on A Dash of Insight.

For inquiries regarding advertising and republication, contact main@newarc.com

Follow Jeff on Twitter!

Enter your email address:

Delivered by FeedBurner

Certifications

  • Seeking Alpha
    Seeking Alpha Certified
  • AllTopSites
    Alltop, all the top stories
  • iStockAnalyst
Talk Markets
Forexpros Contributor
Disclaimer
Copyright 2005-2014
All Rights Reserved

« A Word from the Wise: Ray Dalio | Main | Constructive Postponement »

March 07, 2011

Comments

oldprof

scm - I agree that the auto impact could be worse and that we should watch carefully.

James Hamilton did the best work on this a few years ago, and I plan to keep that in mind.

Perhaps we do not yet need to bet. There are a lot of economic factors and we will see signs of trouble. You do not need to speculate about problems any more than about improvements.

Thanks for highlighting a key point, which we should all watch.

Jeff

scm0330

Dr. Jeff, we've done a little work on autos as well, and aren't entirely as sanguine. It appears we're still in an auto restocking deficit; we're scrapping more than we're buying (so sales remain below replacement rates), and the average age of cars on the road is at an all-time high (10.3 years). No doubt, some of that is related to better quality, and possibly changing lifestyles. Still, I think it's also a measure of consumer stress. While many other indicators across the economy are flashing a little better, car sales remain depressed. Why?

A car purchase remains a really big financial decision for the average household. If we're talking new, we're talking about $33k, with the banks requiring about $7k down. The rest gets financed. (I'm referring to the latest consumer credit data release from the Fed.)

Now, what we don't know is how consumer purchasing patterns may change with $4 gas. We'll know soon enough, because it's coming.

I think high gas has a chilling effect -- fewer consumers are willing to lay out the risk of a big-ticket purchase. New car sales slow, fewer miles are driven, which includes fewer trips to the mall, and fewer discretionary purchases. Everyone watches and waits. The consumer economy slows.

Time will tell. Place your bets and take your chances.

idoru@altern.org

Thank you for this.

Judy Graff

Great blog post. I really like your easy-to-understand synthesis. Question: what about housing?

The comments to this entry are closed.