Light Vehicle Sales Are We at a Turning Point? Federal Reserve Bank of Chicago June 3, 2016 Paul Traub Senior Business Economist
Overview U.S. Economy (C + I + G + Nx) U.S. Consumer Ability and Willingness to Buy U.S. Auto Industry Changing long-run demand for personal mobility Contractionary determinates Expansionary determinates Summary and Questions 1
Main Economic Indicators Annual Comparison 2009, 2015 and 2016 March YTD 2009 2015 2016 GDP Annual Growth Rate -2.8% 2.4% 1.9% 1 PCE Core Inflation Yr. / Yr. 1.2% 1.3% 1.7% Unemployment Rate Annual Avg. 9.3% 5.3% 4.9% Participation Rate 65.4% 62.6% 62.9% Nonfarm Job Growth (Monthly Avg.) -298,100 228,700 203,000 Initial Unemployment Claims 573,730 278,140 268,767 1. Year-over-year change - Q1 16 / Q1 15 Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics 2
U.S. Real GDP Billions Chained $2009, % Change Q/Q at SAAR $ Billions 17,000 16,500 16,000 15,500 15,000 Q4 07 $14,992 Q1 16 $16,505 Percent 15.0 12.5 10.0 7.5 5.0 14,500 14,000 13,500 13,000 12,500 12,000 Q4 08-8.3% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 0.8% 2.5 0.0-2.5-5.0-7.5-10.0 Source: U.S. Bureau of Economic Analysis 3
U.S. Real GDP Contribution to Percent Change, Q4, 2015 - Q/Q at SAAR Percent 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0-0.2-0.4-0.6 0.8 2 nd Est. 0.5 1 st Est. 1.3-0.5 GDP Consumption Private Investment -0.2 Net Exports 0.2 Government Note: Private domestic investment includes: nonresidential -0.81, residential +0.56, and -0.20 inventory change. Government Consumption and Investment includes: Federal -0.11 and State and Local 0.31. Net Exports includes: Exports -0.21 and Imports +0.03. Source: U.S. Bureau of Economic Analysis 4
Real Personal Consumption Expenditures Index, Q4 2007 = 100 Index 140.0 130.0 Q1 16 129.0 120.0 110.0 111.7 109.9 100.0 90.0 80.0 '07 '08 '09 '10 '11 '12 '13 '14 '15 Durables Nondurables Services Source: Author s calculations using data from the BEA 5
Real Personal Consumption Expenditures Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent 10.0 8.0 8.0 6.6 6.0 4.0 2.0 1.7 2.0 0.7 2.1 3.6 4.3 4.2 2.7 3.0 2.1 2.4 3.8 0.6 2.8 2.6 1.9 1.3 0.0-2.0 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Durable Goods Nondurable Goods Services -1.3 Source: U.S. Bureau of Economic Analysis 6
U.S. Light Vehicle Sales S.A.A.R Millions of Units Millions 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 Cash for Clunkers Aug 09 14.6 Feb 09 9.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 SAAR Annual Average May 16 17.4 17.2 YTD Source: Ward s Automotive and BEA 7
Real Gross Domestic Investment Billions Chained $2009, % Change Q/Q at SAAR $ Billions 3,000 2,750 2,500 2,250 Q1 16 $2,833.6 Percent 50.0 40.0 30.0 20.0 10.0 2,000 1,750 1,500 1,250 1,000 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16-2.7% 0.0-10.0-20.0-30.0-40.0-50.0 Source: U.S. Bureau of Economic Analysis 8
Private Fixed Investment Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent 20.0 17.2 15.0 10.0 5.0 0.0-5.0-10.0 10.1 8.6 9.4 10.1 8.2 5.0 5.1 3.3 4.1 3.7 2.6 1.6 0.4-0.7-1.0-2.1-1.5-2.7-6.2 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Fixed Investment Nonresidential Residential Source: U.S. Bureau of Economic Analysis 9
New Orders and Industrial Production Index 2012 = 100 Percent 110.0 105.0 Apr 16 104.1 100.0 95.0 93.3 90.0 85.0 2012 2013 2014 2015 2016 New Orders Industrial Production Note: New Orders Nondefense Capital Goods Excluding Aircraft. Source: U.S. Bureau of Economic Analysis & U.S. Bureau of Census 10
U.S. Housing Starts In Thousands of Units (SAAR) and Annual Average (000) s 2,500.0 2,000.0 1,500.0 1,000.0 Apr 16 1,172 500.0 0.0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Annual Average SAAR Note: The United States averaged 1.5 million housing starts per year 1990 to 2004. Source: U.S. Census Bureau 11
Government Consumption & Investment Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0 4.3 2.8 2.8 2.9 2.6 2.3 1.8 1.5 1.6 1.1 1.2 1.2 0.3 0.0 0.1-0.1-0.5-0.8-1.2-1.6 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Federal Federal Nondefense State & Local Source: U.S. Bureau of Economic Analysis 12
Stronger U.S. Dollar Select Currencies Jan 3, 2014 to May 27, 2016, Index 2014 = 100 Index Canadian Dollar to U.S. Dollar Index 135 130 Euro to U.S. Dollar 130 125 125 120 119.0 Stronger U.S. Dollar 118.6 120 115 115 Stronger U.S. Dollar 110 110 105 105 100 100 Weaker U.S. Dollar 95 95 Weaker U.S. Dollar 90 90 J M M J S N J M M J S N J M M J M M J S N J M M J S N J M M Index Japanese Yen to U.S. Dollar Index 130 110 Chinese Yuan to U.S. Dollar 125 Stronger U.S. Dollar 106.4 120 105 Stronger U.S. Dollar 115 110 100 105 103.9 100 95 95 Weaker U.S. Dollar Weaker U.S. Dollar 90 90 J M M J S N J M M J S N J M M J M M J S N J M M J S N J M M Source: Board of Governors Federal Reserve System 13
Real Imports and Exports Billions Chained $2009, Index 2005 = 100 Index 200 180 160 140 120 100 80 60 40 20 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Net Exports Exports Imports Q1 16 151.9 122.9 -$561.2 $1,000 $800 $600 $400 $200 $0 -$200 -$400 -$600 -$800 -$1,000 Source: U.S. Bureau of Economic Analysis 14
China PMI Manufacturing & Nonmanufacturing - SA, +50 Signifies Expansion Index 65.0 60.0 55.0 50.0 May 16 53.1 50.1 45.0 40.0 35.0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Manufacturing Nonmanufacturing Source: China Federation of Logistics & Purchasing and Haver Analytics 15
Global Outlook IMF Forecast for Growth (April 16 Database), % Chg. Yr./Yr. Percent 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 7.4 6.3 5.3 5.4 4.9 4.6 4.6 4.8 4.0 4.1 4.2 3.1 3.5 3.3 3.4 3.5 3.6 3.1 3.2 1.7 1.8 1.9 1.9 2.0 2.0 1.2 1.2 2010 2011 2012 2013 2014 2015 2016 2017 2018 Advanced Economies Emerging and Developing Economies World Source: IMF - World Economic Outlook 16
U.S. Real GDP Blue Chip Forecast Annual Percent Change Chained $2009 Percent 3.0 2.5 2.5 2.5 2.4 2.4 2.3 2.3 2.0 2.1 2.1 2.0 1.8 1.5 1.0 Jan '16 Feb '16 Mar '16 Apr '16 May '16 2016 2017 Source: April 2015 Blue Chip Economic Indicators 17
U.S. Consumer Ability and Willingness to Buy 18
Real Disposable Personal Income & Savings Rate Percent Change Year/Year and Percent of Personal Income Percent 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0 Dec 12 10.5% 6.8% Apr 16 5.4% 3.3% -6.0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Savings Rate Real DPI Source: U.S. Bureau of Economic Analysis 19
Personal Savings Rate As Percent of Personal Income Percent 14.0 12.8 12.0 10.0 8.0 7.1 7.3 8.4 7.6 6.0 4.8 5.7 4.0 2.0 2.8 2.5 0.0 '30's '40's '50's '60's '70's '80's '90's '00's '10's Source: U.S. Bureau of Economic Analysis 20
Personal Consumption Expenditures Gasoline and Other Energy Related Products - % of DPI Dollars 4.5 4.0 Q3 08 4.01% 3.5 3.0 2.5 2.0 1.5 1.0 Q1 16 1.87% Equivalent to $200 billion in $2009 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Author s calculations using U.S. Bureau of Economic Analysis data. 21
Total Consumer Credit Revolving and Non-revolving Credit as % of DPI Percent 28.0 25.0 Mar 16 26.2% 22.0 19.0 19.0% 16.0 13.0 10.0 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 Total Credit Total Less Government Held Student Loans Source: Federal Reserve Bank - Board of Governors June 3, 2016 Federal Reserve Bank of Chicago 22
Personal Interest Payments As a Percent of Disposable Personal Income Percent 3.5 3.0 2.5 2.0 Apr 16 2.0% 1.5 1.0 0.5 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 Source: U.S. Bureau of Economic Analysis June 3, 2016 Federal Reserve Bank of Chicago 23
Yield Curve 10 Year 1 Year Treasuries Percent 4.0 3.0 2.0 1.0 May 16 121 bps 0.0-1.0-2.0-3.0-4.0 '54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 Source: Board of Governors Federal Reserve System 24
Inflation CPI All Items and Core, Percent Change Yr./Yr. - SA Percent 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 All Items Core Apr 16 2.2% 1.1% Data: Consumer Price Index for All Urban Consumers, All Items and All Items Less Food and Energy Source: U.S. Bureau of Labor Statistics 25
Personal Consumption Expenditures Gasoline and Other Energy Related Products - % of DPI Percent 4.5 4.0 Q3 08 4.01% 3.5 3.0 2.5 2.0 1.5 1.0 Q1 16 1.87% Equivalent to $200 billion in $2009 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Author s calculations using U.S. Bureau of Economic Analysis data. 26
Consumer Sentiment University of Michigan Index 140 120 January 00 112.0 100 May 16 94.7 80 60 40 20 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Thomson Reuters / University of Michigan June 3, 2016 Federal Reserve Bank of Chicago 27
Initial Unemployment Claims 4 Week Moving Average Thousands 800.0 700.0 600.0 500.0 400.0 674 501 489 659 300.0 200.0 100.0 0.0 '82 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 266 277 Source: Author s calculations using U.S. Bureau of Economic Analysis data. 28
Stock Market S&P 500 and Dow Jones Indices, Index Jan, 2014 = 100 Index 120.0 115.0 110.0 105.0 Week Ending May 27, 2016 114.0 2,080.8 109.1 17,750.4 100.0 95.0 90.0 '14 F M A M J J A S O N D '15 F M A M J J A S O N D '16 F M A M S&P 500 Dow Jones Source: St Louis Fed and S&P Dow Jones 29
Home Prices S&P Case-Shiller 20 City Composite Jan, 2010 = 100 Index 220.0 200.0 180.0 Mar 16 187.1 160.0 140.0 120.0 100.0 80.0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: St Louis Fed and S&P Case-Shiller 30
Household Net Worth Trillions of Dollars, Q1 00 to Q4 15 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 '00 '02 '04 '06 '08 '10 '12 '14 Home Equity Q2 07 $65.2 Total Decline Q3 07 Q1 09 -$12.6 Financial and Other Q4 15 $83.7 $18.5 Source: Federal Reserve Z.1 Statistical Release,Table B100, Households and Nonprofit Organizations 31
Auto Industry 32
U.S. Total Vehicles Actual and Trend Trend over Time - In Millions of Units Millions 20,000 17,500 2010 17,300 2020 19,710 18,690 18,040 15,000 12,500 10,000 '80 '85 '90 '95 '00 '05 '10 '15 '20 Actual 1995 Trend 2000 Trend 2005 Trend 2010 Trend 33
Origin of New Vehicle Sales Determinates of Long-Run Vehicle Sales Trend More Vehicles per Household Household Formation 5% 20% Scrappage 75% Total 34
Vehicle Miles Traveled 12 Month Total Miles Traveled in Billions 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 35
Length of Vehicle Ownership Average Months Owned Months Q1 2015 80 77.8 72 64 56 48 40 32 24 Q1 '05 Q1 '06 Q1 '07 Q1 '08 Q1 '09 Q1 '10 Q1 '11 Q1 '12 Q1 '13 Q1 '14 Q1 '15 New Vehicles Combined Used Vehicles Note: Average age for passenger cars and light trucks increased to 11.5 years in 2015. Vehicles in operation (VIO) increased to 258 million up 2.1% between 2014 and 2015. Source: HIS Automotive : http://press.ihs.com/press-release/automotive/average-age-light-vehicles-us-rises-slightly-2015-115-years-ihs-reports 36
Sales Weighted Vehicle Age 10 Year Sales Weighting Years 4.5 4.3 4.1 3.9 3.7 3.5 3.3 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 Actual Forecast Note: Since 1960 the average cycle has been 8 years with an average expansion of 5 years. Source: Author s calculations using Ward s Automotive and Blue Chip Forecast data. 37
New & Used Vehicle Prices Index 2007 = 100 Index 120.0 115.0 110.0 105.0 Apr 16 108.1 108.0 100.0 95.0 90.0 85.0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 New Used Data: New Vehicles and Used Cars and Trucks CPI. Source: Author s calculations using Bureau of Labor Statistics data.. 38
Light Vehicles Sales & Nonfarm Employee In Millions of Units S.A.A.R. Millions 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 SAAR SAAR Est. Note: Linear regression L.V. Sales to Nonfarm Employment and Trend Variable with R 2 of 52.3. Source: Author s calculations using data from Ward s Automotive and BLS 39
Light Vehicles Sales per Nonfarm Employee L.V. SAAR / Nonfarm Employment Units 0.200 0.175 0.150 0.125 0.100 0.075 0.050 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 VPE 12 MMA Linear (VPE) Source: Author s calculations using data from Ward s Automotive and BLS 40
Labor Participation Rate Percent of Noninstitutionalized Civilian Population Percent 68.0 67.0 66.0 65.0 64.0 63.0 Apr 16 62.8% 62.0 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: U.S. Department of Labor: Bureau of Labor Statistics, Bureau of Economic Analysis and the Federal Reserve 41
Civilian Labor Force Percent Change Yr./Yr. Percent 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 2015 0.8% Source: U.S. Department of Labor: Bureau of Labor Statistics, Bureau of Economic Analysis and the Federal Reserve 42
Light Vehicles Trend Using Nonfarm Employee In Millions of Units S.A.A.R. Nonfarm 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 SAAR SAAR Est. Source: Author s calculations using data from Ward s Automotive and BLS 43
U.S. Nonfarm Payrolls Monthly and Annual Average Job Change In Thousands Thousands 400 350 300 250 200 150 2012 179.1 2013 192.6 2014 251.3 2015 228.7 Apr 16 192.3 160 100 50 0 2012 2013 2014 2015 2016 Monthly Actual Annual Average Source: U.S. Department of Labor: Bureau of Labor Statistics 44
U.S. Light Vehicle Industry Millions of Units Millions 20.0 18.0 16.0 16.0 17.3 Trend 2011 16.0 2015 17,385 Blue Chip Consensus 2016 2017 17.3 17.2 16.7 14.0 12.7 12.0 12.3 10.0 10.4 8.0 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: Ward s Automotive 45
U.S. Light Vehicle Pent-Up Demand Millions of Units Millions 20.0 15.0 15.5 10.0 5.0 0.0-5.0 2015 254K -10.0 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 46
U.S. Light Vehicle Blue Chip Forecast Millions of Units Calendar Year Millions 19.0 18.0 17.0 17.7 17.5 17.6 17.6 17.4 17.4 17.5 17.3 17.3 17.2 16.0 15.0 14.0 Jan '16 Feb '16 Mar '16 Apr '16 May '16 2016 2017 Source: April 2015 Blue Chip Economic Indicators 47
U.S. Light Vehicle Incentives As Percent of Transaction Price - SA Percent 12.0 11.0 May 16 10.9% 10.0 9.0 8.0 7.0 6.0 '10 '11 '12 '13 '14 '15 '16 Source: Author s calculation using Ward s Automotive and J.D Power data. 48
Light Vehicle Transaction Price Annual Average & Percent Change Yr./Yr. Dollars $32,000 $30,000 $28,000 $26,000 0.5 1.6 1.8 2.4 2.2 2.9 1.6 4.4 2.1 0.9 2.7 May 16 $30,993 Percent 2.4 2.3 2.4 6.0 4.0 2.0 0.0 $24,000 $22,000-0.7-3.6 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 May YTD % Chg. Yr/Yr (Right) Transaction Price (Left) -2.0-4.0 Source: Author s calculation using J.D Power data. 49
Finance Term Length of Loan in Months 70.0 68.0 66.0 64.0 62.0 60.0 58.0 56.0 54.0 52.0 50.0 59.5 61.1 62.0 62.8 63.8 63.6 63.1 62.6 62.8 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 May YTD 63.5 64.5 65.0 65.9 66.9 67.7 Source: J.D Power data. 50
Average Financing at Finance Companies New Car Loan Parameters Index 2008 = 100, NSA Percent 120.0 Q4 2015 Index Actual 110.0 100.0 90.0 80.0 70.0 113.9 106.6 105.4 85.5 $27,986 65.4 Mos. $489.95 5.03% 60.0 '08 '09 '10 '11 '12 '13 '14 '15 Maturity Rate Financed Payment Source: Author s calculations using Federal Reserve Board of Governors data 51
Auto Loan Rates Commercial Banks New Autos 48 and 60 Month Loans Quarterly, NSA Percent 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 48 Mos. 60 Mos. Prime Q1 16 4.27% 4.11% 3.50% Source: Federal Reserve Board of Governors 52
Payment Risk Percent Change in Payment to Percent Chang in Loan Rate by Duration Percent Change in Loan Rate Percent Change in Payment by Duration 36 Months 48 Months 60 Months 72 Months 1% 1.5% 2.0% 2.4% 2.9% 2% 3.1% 4.0% 4.9% 5.8% 3% 4.6% 6.0% 7.4% 8.7% 4% 6.2% 8.1% 10.0% 11.7% 5% 7.8% 10.2% 12.5% 14.7% 53
Car & Light Truck Mix Percent of Light Vehicles Percent 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Car Share Light Truck Share Apr 16 YTD 58.6% 41.4% Source: Author s calculations using Ward s Automotive data. 54
New Home Construction and Pickup Trucks Index 2005 = 100 Index 120.0 100.0 80.0 60.0 40.0 20.0 0.0 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Construction Pickups Data: New Privately-Owned Housing Units Under Construction and Ward s Large Pickup truck sales. Source: Author s calculations using U.S. Bureau of the Census data. 55
Oil Price North Sea Brent Average Annual Price In Current Dollars Dollars $140.0 $120.0 $100.0 $104.2 $115.0 $97.5 $80.0 $60.0 $63.1 $55.6 $71.1 $79.1 $40.0 $20.0 $0.0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Source: International Energy Agency Reference Case Forecast 56
Gasoline All Grades Average Annual Price In Current Dollars Dollars $4.0 $3.5 $3.50 $3.76 $3.33 $3.0 $2.5 $2.67 $2.31 $2.63 $2.74 $2.0 $1.5 $1.0 $0.5 $0.0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Source: International Energy Agency Reference Case Forecast 57
Buying Conditions for Vehicles University of Michigan Index 160 150 140 Apr 16 143.0 130 120 110 100 90 80 '08 '10 '12 '14 '16 Source: Thomson Reuters / University of Michigan June 3, 2016 Federal Reserve Bank of Chicago 58
Reasons for Buying Conditions for Vehicles University of Michigan Good / Bad Reason: Why do you say so? Low Prices Prices Will Increase Low Interest Rates Rising Interest Rates Time's good Fuel Efficiency Prices High High Interst Rates Can't Afford Uncertain Future Gas Prices Poor Selection 2 2 3 3 3 4 4 6 12 13 28 29 Note: May add to more than a 100 due to multiple mentions. Source: University of Michigan Survey of Consumers 0.0 5.0 10.0 15.0 20.0 25.0 30.0 59
Summary Despite the slow start in 2016, the U.S. Economic growth is to continue to expand at a moderate pace in 2016 and 2017. The U.S. consumer continues to experience improved financial conditions supported by low energy prices, improving real personal income and rebounding household net worth. Low interest rates and low prices are two of the factors making it a good time to buy a new vehicle. Demographic changes, increasing length of ownership, and slowing labor force growth are changing the determinates of long-run vehicle sales trend. 60
Summary Low interest rates and longer financing terms are helping to keep new vehicle payment affordable while offsetting rising vehicle prices. Low energy prices are helping SUV and Pickup truck sales pushing light truck share to new record highs. Light vehicle sales may have peaked in 2015 but are expected to stay in the 17.0 million range through 2017. Rising interest rate could be a risk to vehicle sales going forward by causing monthly payments to increase at a faster pace than overall inflation. But consumers continue to feel it is a good time to buy a vehicle. 61
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