“Retail sales in May are being hit by several negative variables—specifically, high gas prices, lower incentive levels and some inventory shortages,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “As a result, the industry will likely be dealing with a lower sales pace at least through the summer selling season, putting pressure on the 2011 outlook.”
J.D. Power used the word “dismal” to describe early May vehicles sales. In actuality, even the higher April sales are dismal. The following graph shows new light vehicle sales normalized to population. The normalization factor was 200 million, the approximate population in 1968.
Current per capita car sales are near the recession lows of previous business cycles. Right now seasonal adjustment is making the comparisons look even worse. And the early May estimates are not included in the Econintersect graph.
So, even if the slowdown in May is temporary, sales must do far more than return to the previous level to be healthy. Instead of light vehicle sales being in the 13 million range, they must increase by 4 – 6 million more to reach averages for previous business cycles. To reach the peaks of the 1970s, new vehicle sales would need to reach about 24 million.
The unusual levels of current car sales, indeed the sales during and following The Great Recession, have been far below levels seen in the previous 40 years. The following graph displays this divergence:
The above graph emphasises that the impact on new car sales during The Great Recession was several times greater than earlier recessions. The effects seen following the end of the 2007-09 recession were simply not seen in the recovery years for previous recessions since the 1960s.
The data from 1967-1975 is for unadjusted data only, so the number of low performing years is overstated. We are comparing to April 2011 and Aprils have above average sales historically. The average rank for April over the 44 years 1967 – 2010 is fifth (average = 4.77).
New vehicle sales aren’t just dismal for early May – they are dismal even without the current slowdown. As Rick Davis wrote recently, consumers are coming to terms with frugality.
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