Under the radar: Rising demand for Mexico-built auto engines is another recovery sign

Posted Nov 19th 2009 5:00PM by Joseph Lazzaro

Under the radar: Some trends are obvious enough and visible to all investors. Others are more-subtle, but are just as potent, and these often slip 'under the radar.'

Case in point: Demand for Mexico-built vehicle engines is rising, helping to pull Mexico's economy out of it's recession, Bloomberg News reported.

The significance for investors? The increased demand for engines made south-of-the-border is being driven by a rebound in U.S. auto sales. Again, the increased sales trend is nothing to write home about -- U.S. automaker new vehicle sales rose in October and are expected to rise in November, as well, according to data compiled by Edmunds.com, Dow Jones reported, but the important dimension is the trend's direction.

Further, when combined with recent U.S.. vehicle sales data, Mexico's engine data provides further confirmation of a vehicle sales bottom -- a modest accomplishment, but given where the U.S. auto sector (and economy) has been, we'll take it.

Is the U.S. headed back to the days of 15 million vehicles sold in a year? No, not anytime soon. J.D. Power and Associates is forecasting total 2009 U.S. vehicle sales of 10.3 million, with total sales of 11.5 million vehicles seen in 2010. Again, not halcyon increases, but if sales remain on a growth track, that would represent organic demand exclusive of the federal government's 'cash-for-clunkers' incentives -- an encouraging sign for business executives, policy makers, and investors alike.

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