You can’t say we weren’t warned. As reported over a month ago, the biggest drag on recent consumer spending was auto sales.
And this is happening as Automaker inventories are at their second highest in 23 years. If sales are collapsing, then the violent spike in relative inventories as seen in 2008 is not far away.
One month later, this is finally starting to materialize in the OEM numbers, when earlier today both GM and Ford’s US vehicle sales fell more than analysts had estimated in May. According to Bloomberg this “raises questions about stalling consumer demand.”
Not really: as we also warned a month ago when looking at stalling use car price changes, it was only a matter of time before the lack of demand for every low priced autos spilled over to new car sales, which it now has.
GM sales plunged 18 percent, missing estimates for a 13 percent drop, with all four brands reporting declines of at least 14 percent. Ford’s light-vehicle sales slid 6.1 percent, according to Bloomberg, compared with an average estimate for a 4.9 percent decline. GM projects a sales pace for the month that is slower than analysts had predicted. GM said retail sales fell 13 percent and it continued to pull back on deliveries to rental-car fleets. The largest U.S. automaker said it sold 22,000 fewer rental cars in the month, the biggest reduction in the past two years.
Sales of Ford and Lincoln passenger cars plunged 25 percent, led by a 37 percent slide for the Taurus sedan, once the company’s flagship. Even the redesigned Mustang saw its momentum fade as deliveries dropped 24 percent. Sales of the recently restyled Ford Edge sport utility vehicle fell 14 percent. F-Series truck sales rose 9 percent and van sales had their best May since 1978 on the strength of a 16 percent gain by the full-size Transit.
To be sure, all of the six largest carmakers were estimated to report declines for May, but the severity of the drop has taken many by surprise. As Bloomberg notes, “even as auto sales gained in April and the U.S. consumer continues to spend, there have been signs of wavering economic confidence, and the industry may struggle to maintain its record pace. As a kickoff into summer on the back of Memorial Day weekend promotions, May is a bellwether for gauging buyer appetite.“
May deliveries “are set to fall year-over-year with two fewer selling days combined with retail demand that is holding steady, but not growing,” Tim Fleming, an analyst at Kelley Blue Book said in a statement before the monthly results.
And the spin from Fleming: “While this year may not bring the growth the industry has become accustomed to, it is important to remember that sales are still at record levels.” Yes, but they are now rapidly tumbling.
via http://ift.tt/1t1ifIp Tyler Durden