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Vehicle Data Don't Portend Crash

JACKSON HOLE, Wyo. -- That the domestic vehicle sales rate for July will come in as high as 11.4 million (annualized) even in the face of the

General Motors

(GM) - Get General Motors Company (GM) Report

strike testifies to how greedy Americans are for new cars and trucks.

The domestic vehicle sales rate soared to its best level in more than a decade back in May (14.1 million). It went on to immediately crush that record in June (14.9 million). One can only wonder what it would have done in July were it not for a plunge in production at the biggest of the Big Three (General Motors accounts for 35.2% of all cars and trucks sold in this country).

The wing nuts write off these huge sales numbers to incentives. (The Big Three began handing out coupons worth a couple thousand bucks off a new vehicle back in April; the average Big Three per-vehicle incentive now sits just under $2,000.) Of course, they have been doing this since 1995. They are now particularly grumpy because their slowdown forecasts have not panned out. Incentives ebb and flow. Sales keep zooming.

Two points here. The first is that an incentive-driven sale counts no less than any other. (


does not asterisk house-sales numbers when mortgage rates are unusually low.)


scoops it up, same as all the others, and dumps it into its calculations for personal consumption expenditure, producers' durable equipment, and the change in business inventories -- all components of

gross domestic product.

Then manufacturers automatically make one more truck to replace the one that left, regardless of what it took to get if off the lot.

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The second is that lots of other things are fueling sales. Every Joe Six-Pack who wants a job has one. His income growth is accelerating and his investments are appreciating (generally); it is little wonder he says he is more confident than he has been in ages. Meantime short-term interest rates -- and, therefore, financing -- are kind. The vehicles themselves are cheaper (prices for new vehicles are now falling at a 1.1% rate on top of a 0.9% decrease in 1997). So is the stuff that makes them go (gasoline prices are plunging at a 10.5% rate).

The things Joe is buying -- big stuff, fancy stuff, fun stuff -- speak volumes about the state of the economy. Check out the table to the left.

Think consumers are on the verge of hibernating? Ducking inside their shells? Not bloody likely. Not while they are rushing to plunk down for fancy (BMW) and fun (Volkswagen, Mustang) cars.


And don't forget the trucks. Nothing quite captures the current climate of cockiness quite like the uniquely American sentiment that bigger is unambiguously better. A few months ago

The Economist

mocked it thus:

The essence of America ... is its vast appetite for bigness. American politicians talk big, spend big and, generally, are big. America is a land of big egos and big cars, big malls and big midriffs. Big people must be hydrated with big drinks. 7-Eleven stores feature the Slurpee, a take-away cup containing 44 ounces of crushed ice and soda. Big roads promote big cars, which in turn require big garages. Big homes house big refrigerators, so ice cream comes in gallon-sized containers. America has more places called Big than any other country. Montana has Big Sky, Big Arm, Big Timer, and Big Baldy Mountain. California has Big Sur and Wyoming has Big Horn. Illinois has Biggsville.

Glance back at the table above. Ford F-Series trucks are leaving the showroom at a rate of 2,577 per day. Per


! The Ford Explorer outsells all the Mustangs, BMWs, Cabrios, Passats, and Beetles


. And by a lot (1.5 to 1)!!

Think the economy is likely to falter while so much bigness abounds?

Thpft. Call me when the Hyundai starts selling well.