Car Sales Remain Weak While Realized Volatility Plummets

Auto sales were responsible for the weak durable goods orders in the GDP report. It could be the catalyst of a recession. Therefore, it’s critical to focus on every new data point available in the car market. The latest information we have is in the chart below. As you can see Nissan (NSANF), Toyota (TM), Fiat Chrysler (FCAU), Ford (F), and GM all missed analysts’ expectations. All the firms which have reported so far have declining year over year sales. This will be the fourth straight month of declines. Some bulls have blamed tough comparisons for the decline in sales, but four straight declines makes it a trend in my opinion. GM, which has the highest sales in this chart, saw a 5.8% decline. GM’s inventories are now at a 9.5-year high. It has 935,758 units (100-day supply) in inventory which is the most since Nov. 2007, which was one month before the recession began.

The car sales don’t match up with the consumer sentiment data as I’ve mentioned previously. It’s important to not look at this as a mixed bad. It is putting lipstick on a pig. The chart below provides an interesting way of breaking down the sentiment survey. I have discussed the difference between Democrats and Republicans in past articles. Democrats are very pessimistic and Republicans are very optimistic. The chart below shows how college educated people are much less optimistic than high school educated people. The only other time in the past 39 years this difference has been negative is during the depths of the financial crisis.

The takeaway from this chart can be these two possible options. Either the economy is once again in a weak state like in 2009 or the college educated people have historically been reflective of a more knowledgeable base, but now are reflecting partisan disagreements. In my opinion, it’s a combination of both. High school educated people are listening to the President talk up the economy even though GDP growth is weak. This is causing them to be overly optimistic. There hasn’t been a sharp decline in the economy which would make them realize they are wrong. It’s also true that there are more Democrats who are college educated. Some of them are partisans who are negative on the economy because their preferred candidate didn’t with the election. This is the wrong approach because Trump’s economic policies haven’t passed, so it’s not really his economy.

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