In what should be no surprise to anyone, car sales crashed after the cash-for-clunkers program ended. Nonetheless, economists and analysts once again managed to be surprised by the rate of decline.

Please consider GM, Toyota, Ford Say U.S. Sales Fell After ‘Clunkers’ Aid Ended.

General Motors Co., Toyota Motor Corp. and Ford Motor Co. said sales fell in September as waning demand after the “cash for clunkers” rebates may have cut industry deliveries to the second-slowest rate this year.

The seasonally adjusted annual sales rate slid to 9.3 million vehicles, based on the average of 8 analyst estimates compiled by Bloomberg. Analysts’ sales estimates are adjusted for one more sales day this month than in September 2008.

Adjusted Sales vs. Estimates

  • GM sales fell 47 percent compared to the 44 percent decline projected by analysts.
  • Ford sales fell 8.9 percent compared to the 5 percent decline projected by analysts.
  • Chrysler sales fell 8.9 percent, matching the average analyst estimates.
  • Nissan sales fell 11 percent compared to the 7.1 percent decline projected by analysts.
  • Honda sales fell 23 percent, compared to the 13 percent decline projected by analysts.
  • Toyota sales fell 16 percent compared to the 13 percent decline projected by analysts.
  • Hyundai bucked the industry slide with a 27 percent increase.

Chicago Surprise

Yesterday, inquiring minds were reading Reflections on the Unexpected Negative Surprise in Chicago Purchasing Index PMI.

“A lot of people would be looking for a pullback, but we’re going to see improving fundamentals in the base economy, and with that higher earnings,” said William Dwyer, chief investment officer at MTB Investment Advisors, which manages $13 billion in Baltimore.

Moments after Dwyer finished yapping, the Chicago PMI numbers came out.

The Standard & Poor’s 500 Index lost 0.7 percent to 9,678.27 at 9:47 a.m. in New York after the Institute for Supply Management’s gauge of business activity slipped to 46.1 in September, lower than the reading of 52 estimated by economists in a Bloomberg survey.

It’s not a recession, just a “dramatic slowing of growth”

Flashback January 24, 2008: Market Comments From Dwyer

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said Wall Street found some relief from word of the economic stimulus plan as well as the efforts of regulators to help bond insurers. He said the Federal Reserve’s decision to lower interest rate this week could also help some struggling homeowners hold onto their properties. The efforts, he said, could ultimately help stave off recession.

“People have that ‘R’ word stuck on the front of their forehead. It’s really just a dramatic slowing of growth. We may not have a recession,” he said.

We need a new rule: Those who did not see this coming are in no place to be cheerleading where the economy or the stock market is headed.

Manufacturing Expands Less Than Economists Expect, Jobless Claim More

Inquiring minds are reading U.S. Economy: Manufacturing Grows at Slower Pace, Claims Rise.

Manufacturing in the U.S. expanded less than anticipated by economists and more Americans filed claims for unemployment benefits, pointing to a recovery that will be slow to generate jobs.

The Institute for Supply Management’s factory gauge decreased to 52.6 in September from 52.9 in August, the Tempe, Arizona-based group said today. Fifty is the dividing line between expansion and contraction. The number of jobless claims climbed to 551,000 last week, more than economists forecast, figures from the Labor Department showed.

The ISM index, which dropped for the first time this year, was forecast to rise to 54, according to the median of 80 estimates in a Bloomberg survey of economists.

Bernanke Out Of magic Magic Bullets

In what is no surprise in this corner, Bernanke admitted he has no magic bullets. Please consider Bernanke Says Jobless Rate May Be Above 9% in 2010.

Federal Reserve Chairman Ben S. Bernanke said U.S. economic growth next year probably won’t be strong enough to “substantially” bring down the jobless rate, which may remain above 9 percent at the end of 2010.

“Most forecasters including the Fed are currently looking at growth in 2010, but not growth so rapid as to substantially lower the unemployment rate,” Bernanke said at a House Financial Services Committee hearing today in Washington. Growth of 3 percent means the rate would “still probably be above 9 percent by the end of 2010,” Bernanke said.

“Is there anything else we should be doing to make sure that we bring the unemployment rate more quickly?” asked Representative Leonard Lance, a Republican from New Jersey. Bernanke replied, “I don’t have any magic bullets to offer. If I did, I would have offered them by now.”

In an interview today, Richmond Fed President Jeffrey Lacker said the central bank will need to raise interest rates when the economic recovery is “firmly” in place, even if unemployment lingers near 10 percent.

“I think the growth outlook, particularly the consumer spending outlook, are more fundamental than labor-market conditions,” he said.

Asked in the hearing to comment on remarks this week by World Bank President Robert Zoellick, Bernanke said he also agrees with the official that “if we don’t get our macro house in order, that that will put the dollar in danger and that the most critical element there is long-term fiscal stability.”

Bernanke Hides Behind Words

At first glance Bernanake offered some sobering news on jobs, but only in relation to even more optimistic expectations elsewhere. I am sticking with a forecast of Structurally High Unemployment For A Decade.

Note how Bernanke attempts to hide behind the word “substantially” without saying what really needs to be said: Unemployment is unlikely to drop at all in 2010.

Furthermore, Bernanke had several chances to get it right on Commercial Real Estate but failed.

Bernanke said at the hearing that the commercial real estate market, while posing “a very serious problem,” is unlikely to cause another financial crisis.

“We are concerned both because the fundamentals are weakening, and because the financing situation is bad,” Bernanke said. Loans may cause “a lot of stress” for “small and regional banks,” he said.

Asked by Representative Gregory Meeks, a Democrat from New York, if there’s a “crisis brewing,” Bernanke said, “I don’t think so, but we’ll have to watch it carefully.”

Bernanke: Why are we still listening to this guy?

If you have not yet played the following video please do so, especially if you think Bernanke has a handle on things.

Another Crisis is Brewing

A commercial real estate crisis is brewing and Bernanke either does not see it or will not admit it. Expect to see dozens of small to mid-sized regional banks go under as a result.

Why Stop There?

There are potential financial crises related to the jobs, currencies, banks, commercial real estate, pay option ARMs, Fannie Mae, pension plans, state funding issues, global trade, protectionism, credit card defaults, deficit spending, unfunded liabilities, derivatives, and a still rising unemployment rate.

Here a the key point to remember: Neither the bailouts nor the stimulus packages solved any structural problems related to the above.

Another crisis of some sort is a virtual certainty.

Just don’t expect many economists to say that. Indeed, economics may be called the “dismal science”, yet collectively, economists seem to be a perpetually optimistic lot although individual results do vary.

Mike “Mish” Shedlock
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