Friday, December 7, 2012

Car replacement on the East Coast caused a spike in November car sales

Another economic indicator that is being blamed on Sandy - though in a positive way - is the November US auto sales (released earlier this week). The gain in auto sales clearly surprised to the up-side.
Reuters: - The 15 percent sales gain in November easily surpassed the gain of 11 to 13 percent most analysts had expected. The annual sales rate in November of 15.54 million was the industry's strongest for any month since the 15.55 million rate of February 2008.

Superstorm Sandy hurt the last few days of sales in October, which finished below expectations, but many consumers simply shifted their purchases to November. In addition, the average age of cars on the road has risen to just above 11 years, and industry officials say that will continue to drive demand.

McNeil said the auto industry is clearly heading this year toward the high end of GM's forecasted range of 14 million to 14.5 million. Many analysts expect the industry to finish 2012 with 14.4 million sales, which would mark the strongest year since the 16.1 million of 2007.
This explanation about making up for the lower October sales or the average age of US autos is wrong. Yes, the car "fleet" in the US is aging. But the November spike was about damaged cars being replaced. Many people on the Atlantic Seaboard had no choice but to buy cars in November. The positive aspect of this disaster is that in order to replace inventories, car production is sure to increase. And that in turn should improve US manufacturing PMI in the coming months (see discussion).
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