What Auto Sales Say About the Economy
DETROIT (
) -- Once again, strong auto sales are signaling a continual gradual improvement in the economy and are enabling share price gains for automakers.
In November, auto industry sales rose 17% over the same month a year earlier. "This year's fourth quarter will be the fourth quarter in a row that the sales rate has increased substantially," said
Ford
(F) - Get Report
analyst George Pipas, on the company's monthly sales conference call. "It's a good sign as we approach 2011."
General Motors
(GM) - Get Report
economist Sue Su said the time has finally come when companies, many of them sitting on cash, are ready to hire. "Businesses have been reluctant to hire workers," Su said. "Only recently, that deadlock seems to be broken ... Now we are seeing businesses a little bit more ready to hire."
"We are starting a positive loop" in which businesses have profits in hand and would like to invest more to meet growing demand, Su said, noting that rising employment will lead to improved consumer sentiment. That will inspire more auto purchases, especially given that the average vehicle today is about 10 years old and could use replacing.
While acknowledging that employment is definitely rising, Ford economist Ellen Hughes-Conwick said the weak housing sector remains a countervailing force. "Our perspective on the housing sector remains negative," she said. "Mortgage debt prevents
big increases in consumer spending."
Overall, however, "despite the drag from housing, many buyers now have the means to replace older vehicles
and we do expect gradual increases in sales in the months ahead," Hughes-Conwick said. Increasing credit availability is also a positive, she said. This is especially true for GM, where the benefit of the
is just now kicking in.
Sizing up individual automaker's prospects following Wednesday's sales numbers, investors maintained their love for the
Ford story
.
Ford led the sector in sales gains
, with a 24.3% increase, and in share price gain with a 3.3% increase.
Honda
(HMC) - Get Report
was second in both categories: sales rose 21% while shares rose 2.9 %.
Toyota
(TM) - Get Report
, despite a 3.3% sales dip, saw a 2.6% share price gain. GM posted an 11.4% sales gain and a 1.7% share price gain.
-- Written by Ted Reed in Charlotte, N.C.
>To contact the writer of this article, click here:
Ted Reed
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