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Are consumers finally starting to spend again?
It has been three years since the economic crisis went from bad to worse, and the signs of recovery still aren't strong. One key consumer indicator, the total number of U.S. auto sales, has remained stuck well below pre-2008 levels -- despite signs that other areas of the economy have started to improve.
But the latest data suggest that auto sales might finally be starting to pick up, at least a little. Will this be the jolt the economy needs?
Still a long way from the good old days of 2007
It seems like ancient history now, but back in 2007, automakers sold 16.14 million cars and light trucks in the United States. Even that was seen as a weak number given recent trends at the time, but automakers would love to have weakness like that today, with 2011's total still looking likely to end up below 13 million.
But even with that depressed total, some reasons for optimism are starting to appear. The latest estimates from Edmunds suggest that Toyota (NYSE: TM ) , which was hit especially hard by supply chain problems following the March tsunami in Japan, is continuing to recover sooner than anticipated. Edmunds estimates that Toyota's July sales will be up about 21% over last month's totals, though still well below last year's levels.
That's a better showing than fellow tsunami victim Honda (NYSE: HMC ) , whose sales are expected to fall further from the already dismal levels seen in recent months. But Honda has deeper problems than supply issues, and adding a Toyota recovery to the steady gains seen by Ford (NYSE: F ) , General Motors (NYSE: GM ) , Hyundai (OTC: HYMTF), Nissan (OTC: NSANY), and others in recent months is a hopeful sign for the industry -- and the economy at large.
Why Toyota's gains may not be anyone else's losses
While key Toyota rivals such as Ford saw sizable sales gains in the weeks and months following the Japanese disaster, the overall rate of auto sales dipped significantly from the 13-million-plus seen early this year and has yet to fully recover. That suggests, contrary to many analysts' expectations in the immediate wake of the earthquake, that many of Toyota's loyal customers decided to postpone new-car purchases instead of taking their business elsewhere.
My guess, extrapolating from recent numbers, is that we'll see the overall rate of sales go up as Toyota's supply problems ease and those customers start to return to dealerships. Will it be enough to get the industry over 13 million for the year? We'll see. The indicator to watch is the seasonally adjusted annualized rate, or SAAR, an expression of what a sales rate over a given period would look like if extrapolated out to a full calendar year.
The SAAR is like the pulse of the U.S. auto market. It goes up and down over time, but it's a useful snapshot of how the patient is doing in any given moment. The SAAR in June was a paltry 11.4 million, still down hard from the levels we saw early in 2011 -- but Edmunds estimates that the indicator will be back over 12 million once July's numbers are reported tomorrow afternoon.
Those numbers will bear careful watching for those interested in the industry's prospects -- as well as the state of the U.S. economy as a whole. The hopeful scenario is sizable gains from Toyota combined with continued year-over-year increases from most of the other major players.
That would be a welcome sign that this still-sluggish recovery continues to be moving in the right direction.
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