Despite weak recent retail sales U.S. automobile sales notched their first uptick in 4 months. This could be good news for the markets and weak consumers in general. Auto sales have a very high correlation with overall retail sales and stock market performance and these figures could be the first signs of a consumer rebound. The data shows that steep price cutting and the GM and Chrysler bankruptcies are actually bringing out some bargain hunters. Total May sales came in at 9.9MM after a 9.3MM reading in April. Unfortunately, surging gasoline prices, stagnant wages and mounting job losses are likely to continue hampering future retail sales despite a potential near-term uptick.
This data likely represents much of what we’re seeing lately – a recovery from nothing more than unsustainable downside momentum. Improvement no doubt, but still not good. Gary Dilts at JD Power recently said:
“While there are some signs of stability in the automotive market, current sales rates indicate that achieving recovery will not be a quick proposition,” said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. “We remain optimistic that the fundamentals will continue to improve and that we will see an uptick during the summer sales season, which will help the industry stabilize further and help build consumer confidence.”
No doubt the recovery hinges on the consumer and that’s exactly why it’s likely to be long and drawn out.