In Dealers “Wildly Overweight” SUVs as Sales Slow, I commented “Vehicles account for 20% of retail spending. A crash or even a significant slowdown will impact retail sales and thus GDP.”
A reader asked me how I calculated that. Let’s take a look.
My number came from the latest Census Department Advance Retail Sales Report.
Here are some charts I created from 7-month totals (January-July) 2017.
Retail Sales in Millions of Dollars
Retail Sales Category Percentages
Key Points
- Motor vehicles and parts account for 21.18% of retail sales. Gasoline stations account for 7.94%. Together that adds up to 29.12%.
- Food and beverage stores (grocery and liquor stores) account for 12.62 percent of retail sales. Food services and drinking places (restaurants and bars) account for 12.14. The food and drink total is 24.76%.
- Nonstore retailers (think Amazon) account 10.39% of retail sales.
Related Articles
- What’s Hot and What’s Not: Retail Trade Employment vs Food Services and Drinking Places
- Deep Subprime Auto Loan Delinquencies Reach 2007 Levels: The Next Big Short?
- Serious Credit Card Delinquencies Rise for the Third Straight Quarter: Trend Not Seen Since 2009
- More Headline Amusement: Consumer Sentiment Surges
Mike “Mish” Shedlock
In the big cities this graph is meaningless …..most don’t even own cars …
LikeLike
Graph is what it is
On average, vehicles account for 21% of retail spending
What about that do you dispute?
LikeLike
Motor vehicle and parts sounds like a very broad category much larger than new car sales. Certainly it includes tires, batteries, oil changes, repairs, etc, etc. At car dealerships I believe new car sales is a surprisingly small part of their business.
LikeLike
Motor Vehicle dealers account for 637,413 of 689,580 (motor vehicles and parts)
It is illogical to conclude the vast majority of that total is anything other than new and used cars.
Moreover your comment “In the big cities this graph is meaningless ” is absurd.
The percentage is the percentage – no matter how it is distributed. The irony is, even if it is parts and tires, your comment about cities is ridiculous.
Mish
LikeLike
Big cities around me, everyone owns at least one car and there’s no usable mass transit.
LikeLiked by 1 person
Yep, only NYC where people don’t have cars.
LikeLike
To those in NYC, NYC is the world.
LikeLike
Spend – Spend – Spend America…..Ever heard of saving for your kids education so they don’t start life $100K in debt? How about saving for retirement? Ever try paying off your house and credit cards? I remember that bumper sticker from the 90’s….”He who dies with the most toys wins”. In reality, the bumper sticker should have said…”He who dies with the most debt is a looser”.
LikeLike
Actually, it should be “He who dies with the least debt is the loser.” Note, “least debt,” and that loser only has one o.
LikeLike
Sorry chief….I meant what I wrote…but I will remember that it’s “loooser”.
LikeLike
Surprised by motor vehicle sales. Average age of my cars = 15 years. Probably can keep them another 5 years. Spending at least 5X as much on groceries with 3 teens in the house.
LikeLike
I have 19 years on my GS300 and really haven’t put that much money into it. Runs great and looks good. When I park it out front oftentimes someone will leave a note on the windshield wanting to buy it. I spend most of my money on food too.
LikeLike
90s era Hondas and Toyotas, in particular their highbrow Lexus and Acura offerings, were quite possible the absolute high point in vehicle quality ever. Unless banned, or confiscated for not being progressive enough, they’ll be plying the roads long after Tesla is a faint memory, and Musk is buried somewhere on Mars.
LikeLike
After Obamacare, social entitlement spending, war-mongering, and interest on the debt… the US taxpayer cannot afford to pay for Elon Musk’s next boondoggle. Taxpayers can’t even maintain current spending levels.
Maybe China or India will send Musk to Mars, but NASA can’t afford it
LikeLike
I have a 2000 Civic that still runs like a top, knock wood. 76K miles (I often ride my bicycle to work), low maintenance, and garage kept. It may outlast me.
LikeLike
Some good Nissans around too from that period.
LikeLike
Surprised as well. I would have guessed food or crack.
LikeLike
If you add insurance for the car the percentage would rise even more. I notice you do not mention insurance. I own a home, have two cars and a life insurance policy also health insurance. My total yearly payment for insurance is about 15% of my gross income. Add another 18% for taxes and I have about 66% to spend. Totals are deceptive on what we spend our money. The real top categories should be taxes and insurance along with autos.
LikeLike
I showed the way the Census Bureau accounts for it.
I do not know if it includes financing (I doubt it), but it does include auto parts and repairs.
I do not believe it counts insurance
Mish
LikeLike
How could a credible report on consumer spending not include insurance premiums and deductibles? That’s a significant chunk of change for at least half of the households in the nation.
Seenitallbefore is certainly not an exception to the rule.
LikeLike
It’s not a report of “consumer spending.” Just “retail spending.”
LikeLike
When someone goes about ownership at minimums (small decent condition over a decade old second hand…mentioned previously once… all in 1000 on the road inc insurance + 400 yearly expenses also inc.insurance + fuel) the insurance alone is near 50% each year of the initial cost of the vehicle. Have to choose a reliable model, choose lower miles, and know how to, or someone who knows how to, inspect it before purchase is all.
People can spend themselves stupid as far as I care, but I get a kick out of watching 4wd suvs crawl along tracks that are to me like asphalt, and taking a hatchback on paths 9/10 would not even attempt in them.
It’s a complete joke, people must be on something else to go about it the way they do.
Maybe they are worried the price tag might come off, or about how much they can get for the vehicle if they don’t meet payments.
LikeLike
In a 2017 Bankrate poll only 41% of Americans reported that they have enough cash in savings to come up with an unexpected emergency that required a $1000 payment. lol.
Yet they’ll go into hock to drive around in the latest and greatest gas guzzler with all the gadgets to impress their friends. The freeways are full of ’em.
For being one of the most educated nations on earth we sure do have a lot of stupid people living in our neighborhoods.
LikeLike
@LFOldtimer wrote “For being one of the most educated nations on earth we sure do have a lot of stupid people living in our neighborhoods”
To quote the very wise Mark Twain: “Don’t let schooling interfere with your education”.
The USA might be one of the most academically credentialed nations on earth, but each day we read and hear stories of epic stupidity and intolerance by college professors who have PhD credentials, but zero wisdom or common sense.
Historically, obtaining a PhD meant studying the #$%* out of a topic and becoming at least a book expert (maybe a real world expert, maybe not).
Today, having a PhD means you have been politically indoctrinated. That’s all it means.
And academics have themselves to blame.
LikeLike
Not just the US, Europe is like that also and other countries too I expect. In Europe people don’t quite have the “think big” view so much, as in they generally settle for a smaller class of car, but that is changing… if you know how cars work you could say they are paying extra for the size of the packaging, not the content.
Its quite funny, when I drive around in my small hatchback, passengers note how low to the ground they are ( which I like). Now I have turned the tables on suv drivers who sit perched in their superior machines though, as I have bought a high top van which I have fitted out as a camper. From there the view is splendid, only beat by lorries, and as it is an old van ( and looks it on the outside, inside is fitted out to high standard) it has ” your paintwork means nothing to me” written on it too.
But in Europe, apart from slightly smaller vehicles in general and maybe less per household , people still go for buying the latest. You know, previously a vehicle was always a personal thing, in that people owned them, and owned them for use. Now it seems they are close to being accessories, that get worn as much as used. The most amazing thing to me here, is that after gfc in Europe, a lot of towns and neighbourhoods went to pieces…basically all the new projects fell into neglect, the local streets and buildings uncared for for lack of funds or interest…. but still everyone is driving around in spanking new vehicles! Gives a kind of cognitive dissonance to it all that is hard to explain.
LikeLike
Surely the biggest consumer item is healthcare (both through premiums and payments). Dwarfs the expenditure on any other item and sucks out so much from most people that they don’t have the funds left over to buy cars, restaurant meals and other discretionary consumer items. (and yes, I know it depends on how the .gov statistically counts consumer spending; all lies, damn lies and statistics).
LikeLike
It’s a government report. They hide the stuff that makes the gov look bad and might alarm the general public that we’re being fleeced.
LikeLike
What cities are those? None in America at least.
LikeLike
Does this vehicle expense include the interest paid on loans? Given a sizable percentage of these car purchases are subprime with jumbo interest rates, it could be a significant number.
Also it would be interesting to see how may of these vehicles are premiums. Two thirty thousand dollar pickups versus one sixty thousand. Most premium vehicles have a fatter profit margin. If everyone is buying the econo-boxes car manufacturers are sucking win for sure.
LikeLike
We have to take these “official” numbers for what they are: outdated statistics designed to measure a 1950s “Leave it to Beaver” economy (that was heavily stylized even then)
If one buys something on the websites of Walmart, Target, HomeDepot, etc … do the pencil pushers in Washington DC count that is online sales or store sales? It doesn’t fit neatly in either category.
If a consumer spends money to park their car in a big city, where does that show up? Parking is a very big cost in large cities, and while some might argue it is a “transportation expense” it has a lot to do with shopping / entertainment.
Lastly, I think in 2017 (but not every year) — many consumers are looking at the cost of after market auto parts versus buying a new car…. and realizing a few fix-ups on the old car will save them money AND give them a superior ride over a new car.
Just the first day depreciation on a new car will fund an amazing shopping spree at a parts store — and the after market parts are often made of something that will last (not cheap plastic cr@p that Detroit is peddling).
The average consumer knows that 8 cup holders does not justify a $15-20K expense (whether cash or financed). That same consumer can buy a center console organizer with USB charging ports, plus separate DVD players for the kids in the back seat — and save thousands, even after paying for professional installation. Detroit simply doesn’t get it.
The shift (back) toward repair/refurbish the old clunker (instead of buying new) is a good thing, but seems to have caught the 8-cup holder bureaucrats at Government Motors by surprise.
After market part manufacturers and car customization shops are profiting from Ford/GM’s latest fubar… Since many of these after market parts are actually made in the USA (not imported for final assembly like GM), its also better for the economy. Keeping the old clunkers out of junk yards / Chinese recycling yards doesn’t hurt either. Everyone wins except the government central planners!!
LikeLike
What about medical?
LikeLike
Shown in “Health and personal care stores” @ $190,420 million.
If the bureau were to report consumer expenditure rather than retail sales, medical items (including of course care and insurance) would doubtless figure prominently.
The general point as made by Mish that automotive-related sales is a huge part of retail does suggest GDP will take a hit in the near future if indications of a downturn in such sales is borne out by what actually occurs over suceeding quarters.
LikeLike
That is my point
LikeLike
The fact medical was left out skews many statistics when this is put up for an “inflation” scan. Autos have improved making them difficult to drop into an inflation scenario.
Over the decades’ changes have been made in how we figure inflation so as to lower the published number. The cuts in reported inflation were an effort to reduce the federal deficit without anyone in Congress having to do the politically impossible which was to register a vote that would harm the image of Social Security. The article below delves into how current government statistic understate how much our buying power is really dropping.
http://brucewilds.blogspot.com/2017/07/the-cpi-understates-inflation-and-skews.html
LikeLike
“Vehicles account for 20% of retail spending.”
Little wonder that subprime mortgage morphed into subprime auto loan.
LikeLike
Right. A few comments in here miss the fact that we’re talking specifically about *retail* sales. That’s the little bit of money that people have left over after they’ve paid rent/mortgage, insurance, bills, taxes, etc.
To Mish’s point, about the glut in dealer supply, I’m sure that the 20% he references is also a percentage of an ever-decreasing top line number. How many people have *more* money for retail spending than they have in previous years?
So really, it’s a double whammy.
LikeLike
Reblogged this on World4Justice : NOW! Lobby Forum..
LikeLike