Auto sales are running substantially above estimates according to Econoday. Apparently, economists did not see the restocking needed for many hundreds of thousands of autos ruined by hurricanes Harvey and Irma.
Highlights
With about 2/3 of September’s data in, unit vehicle sales are running substantially above August in what is a significant early indication of strength for the September retail sales report. August was an unusually weak month for auto sales and was held down in part by Hurricane Harvey’s late month landfall in Texas. The early results today point to a rebound in Houston area sales, specifically perhaps replacement sales for damaged vehicles, and they also point at limited effect from Hurricane Irma’s September landfall in Florida. Final totals for September unit sales will be posted at day’s end.
Recent History
Motor vehicle sales are coming off their worst showing in 3-1/2 years due to initial disruptions from Hurricane Harvey. The weakness in unit sales translated into weakness for dollar sales as tracked in the retail sales report where the vehicle component dropped sharply during August. Though Hurricane Irma’s Florida hit is in play for September’s numbers, forecasters see much better strength with the consensus for total unit vehicle sales at a 16.7 million annualized rate vs August’s 16.1 million. Yet the low call for this reading, at 15.0 million, does reflect expectations for a major hurricane hit. Sales of domestic-made models are expected to come in at 12.6 million vs the prior month’s 12.7 million.
Some Numbers
Business Insider reports Big 3 Carmakers Crush Sales Expectations.
- Ford: 8.9% (2.3% expected)
- Fiat Chrysler: -9.7% (-13% expected)
- GM: 11.9% (7.9% expected)
- Toyota: 14.9%
- Nissan: 9.5% (-8.7% expected)
- Honda: 6.8% (1.5% expected)
The only reason sales crushed estimates is economists cannot think.
Let’s not blame all of August’s weakness on hurricanes. And let’s not confuse replacement of storm-damaged autos with renewed strength.
Finally, and as I have commented before, the net impact of hurricanes is not good for the economy, even if it helps a couple of areas in isolation.
Mike “Mish” Shedlock
Marketwatch is also reporting strong increases in consumer incentives to move product, so the question is what is having the larger impact, incentives or the hurricanes?
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Fords DSO dropped a touch. Seem to be managing the down cycle decently.
This afternoon the new whiz bang CEO going to present his plan.
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Ford announced in mid to late Sept they were idling manufacturing at 5 plants in US and Mexico from one to three weeks to reduce excess inventory. This may have more to do with the DSO than the hurricanes.
New whiz bang CEO is from the furniture industry. This could be interesting to watch.
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Mulally, who saved Ford from the GFC, came fom the airplane industry, a tad more ccomplicated than the furniture industry.
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A couple of things to consider
1) Incentive spending by automakers. GM incentive spending as percentage of ATP (average transaction price).
June … 11.5%
July … 13.9%
August … 14.6%
2) Calendar effect. September had 5 Fridays (payday) and 5 Saturdays (when family goes to make major durable good purchases). September 2016 only had 5 Fridays. Anytime I see 5 Fridays & Saturdays in a month I know it will be (very likely) a good retail month.
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oops. Those numbers are for July, August, and September.
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…making them even “better”…
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October has 4 saturdays.
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But but but, the car companies will hire more people who will spend their earned money in stores and restaurants, etc etc.
Let’s break some windows!
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Exactly. Let’s break a whole lot of windows. The more the better. And, why stop with windows. Tear down, burn down, etc. as many buildings as possible. Then, let’s really get into this, people. Demolish bridges, tear up railroad tracks, burn crops in the fields, and so on. The more we destroy our economy, the more our economy will thrive. Brilliant!!
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Yea Tom, hurricanes are saving the world!
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Mish – saw significant numbers of trucks heading north from the Atlanta area last week hauling obviously storm damaged vehicles. Would not buy a used car up in the northeast any time soon!
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The engines, transmissions, wheels and tires are good. Bumpers and body parts have resale value. Electronics and upholstery are a total loss. The hurricane compensates somewhat for cash for clunkers losses to the parts biz.
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The Fed Put will hold it all together long enough to get dollar devaluation (animal spirits) into high gear. The choices are, default or devalue. The former ends the Fed,,,the latter lets them live to fight another day.
Ps. If the hurricanes don’t do it, there is always war. That will smash a lot more windows “over there” keeping the glass industry “over here” busy exporting products.
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Mish —
All these auto manufacturers had massive surplus inventories back in early August — at least double the number of days of inventory that they (and analysts) consider “normal”. Several of the manufacturers were doing significant layoffs over the summer.
So does this sales surge / hurricane replacement binge put inventories down to “normal” levels (just cleaning out inventory), or does it represent enough replacement demand that they will run factories more than expected?
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I do not know precisely
I expect inventory will go down in the hurricane zones to more proper levels. But the rest of the dealers?
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you gotta listen to these guys
http://shareholder.ford.com/news-and-events/events/2017/10-03-17
Can‘t speak if it’s BS, but they are talking like Steve Jobs 30 years ago
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Hurricanes can’t fix subprime auto.
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We need to look at total retail sales. Motorists who are insured comprehensively will still have to pay the excess and not everyone has comprehensive car insurance. So it is likely that the spurt in car sales will come at the expense of falling sales elsewhere other than furniture and white goods covered by storm insurance. Likely that eating out will suffer the largest fall in sales.
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Yeah duh! The “boost” from reconstruction/replacing happens with money that should have been used for normal investments and consumption. The only way to actually add value is to rebuild better, but I haven’t heard a peep about that.
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BMW MB Buick and Caddy and Lexus has weak months. New camry still selling well. end of story.
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