Last October, The White House famously used its blog to go after auto site Edmunds.com over what it deemed to be faulty analysis of the Cash-For-Clunkers program.
Edmunds.com argued that not only was the sales spike the result of a mere pull-forward in demand, it actually lowered overall car purchasing.
The White House obviously disagreed.
Well it’s April now, and The White House is feeling pretty good about the economy and the car industry, and so it’s revisiting the issue, slamming Edmunds.com again on the blog.
Let’s pick it up at the chart:
Photo: The White House
So if you don’t know what is going on… the red-dashed line is what Edmunds predicted car sales would do sans-clunkers, and the light-blue dotted line is what Edmunds said car sales would do post-clunkers.
The dark blue line, which showed a nice spike up in March (the real reason, probably, that the White House is running the chart) was obviously higher than the Edmunds forecast.
Says The White House’s Christopher Carroll a senior economist with the Council of Economic Advisors:
The ‘short-term pull-forward’ view was perhaps most vigorously articulated by automotive industry website Edmunds.com. In late October, Edmunds.com made a widely-reported forecast for the pace of sales in the last quarter of the year: According to Edmunds, light motor vehicle sales in November and December would be only about 10.5 million at an annual rate (the dashed blue line in the figure). Edmunds furthermore argued that, had the CARS program not existed, the pace of sales would have been higher, about 10.8 million, during those two months (the dashed red line in the figure).
But according to the final data now in hand, the actual pace of sales in November and December was about 11.0 million units (the solid blue line in the figure substantially exceeds Edmunds’ October 28 forecast). Last Thursday’s announcement of a strong pace of sales in March also belies Edmunds’ pessimistic trajectory. Indeed, over the seven months following the end of the CARS program in late August, the sales pace has averaged 10.7 million units at an annual rate, much higher than the 9.6 million pace in the three months that preceded the program, and considerably stronger than the forecasts made by private forecasters just before enactment of the CARS program.
A final source of evidence on size and timing of the ‘pull forward’ effect comes directly from the people who purchased a vehicle under the program. According to a survey conducted by the Department of Transportation as part of the program, the average timeframe over which new car purchasers said they would have otherwise sold, traded in, or disposed of their old vehicle was 2.87 years – far longer than the timeframe of a few months that the program’s critics hypothesized. A plausible interpretation of the available data, in fact, is that many of the CARS sales were to the kinds of thrifty people who can afford to buy a new car but normally wait until the old one is thoroughly worn out. Stimulating spending by such people is very nearly the best possible countercylical fiscal policy in an economy suffering from temporarily low aggregate demand.
Over to you Edmunds.
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