Auto sales continue along with their “plateau”, being estimated at 17.8 million (SAAR) units sold in September. Ford was once again the big loser, with sales down 8.1% year-over-year; GM down 0.6%; Fiat Chrysler -0.9%; and VW -7.8%. Toyota and Nissan managed gains, +1.5% and +4.9%, respectively. Car sales were down almost 19% while pickups and light truck sales fell only slightly, unable to make up the deficit from the car segment.

The only explanation offered for this huge and growing disparity between sales of cars and sales of trucks is gasoline prices. Undoubtedly that is a factor and maybe a primary one, but it still doesn’t account for the huge declines in cars. Cars tend to be much cheaper overall than a pickup truck no matter where gasoline prices are, meaning that pickups are more of a luxury item (outside of those relative few used by people who actually need trucks).

To boost sales, automakers offered what are being described as record incentives. JD Power last week estimated that incentive spending by the manufacturers was an all-time high. Ford’s VP of marketing and sales, Mark LaNeve, figures that industrywide producers had spent $430 more in September 2016 than September 2015. That can only indicate some degree of wariness over the state of consumers.

Because this isn’t in any way typical behavior, even the media which normally is optimistic about almost every economic data point but especially those tied to the auto sectors is caught in between. This Bloomberg article on auto sales is closer to what has been the usual commentary:

Light-vehicle sales in September came in stronger than analysts had estimated, fueled by record incentives, suggesting there’s still some steam left in the U.S. auto industry’s six-year growth spurt.

The key to that more hopeful analysis is the comparison to analysts’ estimates where like corporate earnings that “beat” lowered expectations tells us almost nothing about the state of affairs. A perhaps more grounded assessment was offered by the Wall Street Journal of all places:

Light-vehicle sales sputtered in the U.S. last month despite generous Labor Day holiday deals, with most of the market’s biggest sellers reporting declines from the prior September.

Total vehicle sales first reached 17.8 million (SAAR) in March 2015, leaving the current sales pace in September 2016 as equivalent to a year and a half ago; that is not a trivial deviation from the prior sales trend which was quite well established.

abook-oct-2016-auto-sales-total-saar

Further, the inflection in auto sales is coincident to any number of similar inflections. As noted yesterday, consumer spending on autos, once the only bright spot in an otherwise uniformly dreary economic landscape, is looking more and more like third order effects confirming the monetary drag of the “rising dollar.” What was once a solid and dependable trend established by expectations and behavior of the automakers themselves has clearly shifted.

abook-sept-2016-pce-deflator-real-pi-excl-xfersABOOK Sept 2016 Payrolls Avg Weekly Hours Index YYabook-sept-2016-retail-sales-autos

Because this change wasn’t full-blown recession economists don’t really know what to make of it. Whereas the media might be conflicted, so too are these manufacturers. Ford, for example, has been like the Wall Street Journal article, noticably more pessimistic about the prospects of what they hope is no worse than a “plateau.” Maybe that is because Ford sales have been so far the most impacted by it. Economists at General Motors on the other hand, see it like the Bloomberg article as if consumers have just paused to consolidate in a “strong” economy.

GM Chief Economist Mustafa Mohatarem said in a telephone interview on Monday, “I don’t see any downturn in the U.S. economy any time soon.”

If automakers are truly unconcerned about the prospects for US consumers, then why are they offering record incentives? It just doesn’t square with what they are doing, very much like FOMC policymakers who talk incessantly about how “strong” the economy is particularly consumer spending but yet can’t seem to bring themselves to put that view into action. It is entirely typical for any economist to say something like that as economists never see downturns anywhere, they just rationalize afterward all the “unexpected” as if there were never any signs to the contrary.

In this case, as all others, it won’t be unexpected. The amount of evidence that the economy shifted last year especially after last summer is piling up. Again, because it hasn’t conformed to cyclical behavior there is the tendency to just dismiss it as nothing more than “transitory” weakness, or even a plateau. From the cyclical perspective, the list of economic factors undergoing similar “transitory” pauses has expanded; from the perspective of actual global money under the “rising dollar”, these are quite expected effects of deepening depression. As I wrote yesterday of construction spending further confirming this “something” also in home construction:

Increasingly we are now finding third order effects in the direction of “tighter” financial (monetary) conditions. Among these are labor market indications that are almost uniformly describing deceleration; to what degree and from what starting point is debatable, but it is increasingly likely that there is significant slowing in what would be a third order effect of broadening “tightness.” Big ticket consumer spending items would also be included in this classification, especially autos and now housing.

September auto sales were far from a disaster and at 17.8 million were actually not far from a record pace. And still there is much ambiguity and confusion. That is what is really important here like the unevenness and volatility in PMI’s, for example. The sigh of relief that the US (or global) economy didn’t fall into recession at the start of this year is totally misplaced, and it is leading to serious misconceptions about the state of the economy. This is much worse than recession, and auto sales show quite distinctly that it is still getting worse as “it” spreads into more places including the auto sector once thought invulnerable.