Plunging Vehicle Sales Show Struggles of Recovery
Peter Bernstein, Vice President, pbernstein@rcfecon.com, 312-431-1540 x1515.
Even though 12 of the 16 measures included in our scorecard improved in August, the overall recovery scorecard remained at 93%. The culprit was plunging vehicle sales which fell (on a seasonally adjusted basis) to their lowest level since June 2020. Vehicle sales have declined four consecutive months as the combination of inventory shortages and higher prices have turned away buyers. Excluding vehicle sales, the economy would be 96% recovered by our measure.
Elsewhere, most other sectors improved in the recent month. Although the August employment report was disappointing, it still produced modest improvements in 5 of the 6 employment measures. Real wages and salaries have surpassed their pre-recession peak as has consumer spending, durable goods orders, housing permits, and home sales.
Notes and methodology: All data are seasonally adjusted monthly values. Variables 4 through 9, and 13 are data from August all others are from July. Example calculation for economic variable #1, real income less government transfers fell 8.0% from its February 2020 value to its low point in April 2020. In the latest available report, the variable was 0.2% below its peak value. Therefore, it has recovered 98% of the loss. Data Sources: #1, 2, 3, 12, 13: Bureau of Economic Analysis; #4, 5, 6, 7, 8: Bureau of Labor Statistics; #9: U.S. Employment and Training Administration; #10: Federal Reserve; #11: Bureau of the Census; #14, 15: Bureau of the Census and U.S. Department of Housing and Urban Development, #16: National Association of Realtors.
The Boom and Bust in Auto Sales
Vehicle sales collapsed in the spring of 2020 as the pandemic, and pandemic shut downs kept most show rooms closed or empty of customers. The 48% decline in sales from February to April was the largest drop of any of the measures included in our scoreboard. Sales then began increasing as the virus spread ebbed and the economy re-opened. As we mentioned in an earlier report, pent-up demand resulted in a boom in vehicle sales so that by the spring of 2021, sales were above their pre-recession level.
Source: U.S. Bureau of Economic Analysis, Total Vehicle Sales [TOTALSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TOTALSA, September 6, 2021.
As spring turned to summer, strong demand ran up against declines in auto production caused by shortages of computer chips, reducing inventories and pushing up prices. While vehicle sales are just one sector of the economy, the drop in sales illustrates the long reach of the Covid-19 pandemic. It will not be surprising if other parts of the U.S economy are similarly impacted in the future, hindering a full recovery from last year’s recession.
Appendix – Recent History of Recovery Scorecard
Note: Historical data are often revised so comparisons with earlier RCF Scorecards may reflect the impact of revisions.
Monthly Recovery Percentages
