It is a perverse bit of news: Americans are spending more on gas than on cars. Bloomberg writes that "Gasoline accounted for about 4.4 percent of spending in June, compared with 3.9 percent for autos and motor parts, according to the U.S. Bureau of Economic Analysis."
This is a tragedy for the auto industry as much as it is the sign of a self-inflicted wound. It also says the car business is not likely to recover soon.
The domestic car industry may produce only about 14.5 million unit sales this year. That may mean that almost no individual company will have a profit. By some estimates, vehicles sales could drop to 13 million next year. If oil stays around $120, gas will probably not drop much below $3.50.
What the news says about the consumer is frightening and goes well beyond car sales. If a typical household cannot afford a new car and gas for a year, then many households are probably on the edge when it comes to mortgage and food costs, especially as home loans continue to reset to higher levels. As the economy loses jobs, more people will not be able to cover either car payments or gas.
The statistics on cars are more than a forecast for the industry. They are a harbinger for the broader economic health of the country.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
8-16-2008 @ 7:45AM
C Hameline said...
Mr. McIntyre,
I've read some of your blogs and you have interesting views and I agree with most of them. I was wondering though if you have advice or are you just really good at stating the obvious with no means of how to help fix or solve these problems.
Clint Hameline