Thursday, October 01, 2009

Economic Data Roundup Shows Continuing Tough Times Ahead

Today all kinds of economic data and reports were released. There are a few bits of good news, but most of it is indifferent or just outright bad.

Pending home sales are up, but that's because of the homebuyers tax credit that expires in November. People were rushing to buy homes to take advantage of the credit that was equal to 10% of the home value up to $8,000. 30 year mortgage rates are actually testing historical lows, but with tight credit restrictions and more scrutiny, fewer people will find themselves eligible for the best rates. Home prices are still down 30% or more from highs nationally and many are underwater since all too many people bought into the peak, meaning that they'd owe money when they went to sell - making such propositions all the more difficult (and further reducing the number of potential buyers).

Unemployment figures came in worse than expected, but retail sales for the 3d quarter were up 1.2%, pretty much entirely due to the cash for clunkers goosing of the auto sales for July and August.

Ford announced that its September sales plummeted 37.2% from August. CNN notes that Chrysler's September auto sales tumble 42%, but manage to beat analysts' expectations (which were already low to begin with). The cash for clunkers effect has quite a bit to do with that, and I expect sales to continue to slow in the auto sector for the foreseeable future as concerns over job stability and the poor economic climate mean that demand for big ticket items will remain below average.

Saturn is already toast, but with a further slump in sales, even the resuscitated GM and Chrysler will face a down market with little upside. The numbers were also down 5% from last August.

I don't expect the figures to be any better at GM, which didn't see the kind of sales boost that Ford did from the cash for clunkers program. In other words, sales figures from the auto sector are going to be dismal in the fourth quarter, dashing hopes of a rebound.

Saturn's demise also means that unemployment is going to rise, the manufacturing base is going to further decline, and the number of people relying on government benefits is going to rise.

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