Vehicle sales as a bellwether for the economy

 

E. M. Smith has some cogent thoughts on the matter.

Two different car traders saying cars are not selling at auction. This is bad ... The implication here is that recent interest rate rises along with price inflation and job loss has folks just not buying cars, so dealers are not buying them, even at wholesale auction, and that means banks are going to have a lot of “inventory” on their books when they would rather have the “bad loan losses” gone and be re-lending the money. But they aren’t. All around not good.

First it is cars. Then it is houses. Then it is businesses. Then the economy augers in.

. . .

Fuel costs are rising incredibly as the Gang Green Policies put reserves out of reach of production.

The Fed has been punting interest rates up at a crazy rate. What is it, 3 x 3/4% in a row (in a market where 2 x 0.25% is prone to apoplexy)?

Ford, GM, and others have announced going 100% EV (so why in hell would anyone invest in oil production and refining with a 30 year payback, and why would a dealer buy used petroleum cars for resale? Also why would folks with gas or Diesel trucks trade them in for unobtainium EV trucks?)

Bottom line is that a great shock is being pushed into the car / transport business and The People are not buying it (or the cars); so the sector (and with it the economy writ large) is shuddering to a halt.

. . .

But that the banks are not selling distressed assets (priced too high at auction), and the market is not clearing for used / repo cars… well that argues strongly for “collapse in early stages”. Watch for falling real estate prices, contracting GDP, and overall monetary decline in value in keeping with the Real inflation Rate (not the nominal government numbers). Eventually real estate will go back up in value, but only after the price bubble collapses and the market clears. Usually about a year to 18 months.

That folks are letting go of their cars is bad enough; but that brokers are not buying the inventory at prices that the banks loaned on; well that’s very bad as is indicates the Bank Loan Desks are already compressed and it will only get worse as higher interest rates and Government Mandates put them further under water. This will ripple back upstream to the car makers, their employees, and more. At a slightly slower and slightly delayed timing, the same thing ought to show up in the housing market. I’m already seeing “For Sale” signs staying up a long time on local houses; where 6 months ago they were selling the same day they were listed.

Hang onto your hats, it’s going to be a bumpy ride and the roller coaster is just pulling out of the station.

There's more at the link.

Remember our discussion last week of producer price inflation in Germany?  It contained this graphic (clickit to biggit):

That last bit, the very steep rise in PPI, is presently running at well over 40% year-on-year;  and the PPI is upstream of the consumer price index (CPI), which is going to be hit even harder.  If - I should say, when - Germany's economy collapses, it takes the European Union with it.  That also removes most of our major trading partners from the board, so the US economy will tank soon thereafter, even without considering internal issues such as inflation and supply chain problems.

Folks, this is actually happening right in front of our eyes.  It's no longer hypothetical;  it's no longer purely theoretical.  It's going down.  Now.  Mr. Smith's remarks merely provide a different perspective on a reality that can no longer be denied.

As John Donne said about death and dying:

Send not to know for whom the bell tolls. It tolls for thee.

He might as well have been talking about the US and global economies at this point.

I hope and pray all my readers have taken the opportunity, and had the wherewithal, to prepare as best they can for what's coming.  None of us are going to find it easy to weather the economic storm;  but "forewarned is forearmed", and if we've applied ourselves, we should by now be as ready for it as we can be.  That won't make it easier to survive, but we'll be better off, and have a better chance of doing so, than those who shrugged off all warnings and carried on as if they didn't have a care in the world.  They're about to find out how wrong they were.

Peter

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