1. 1 Econonomic Indicator Car and Truck Sales ECON 435 Jesse Walia Christoph Lilienfein

2. 2 Table of Content Introduction Introduction Content of the report Content of the report Economic Importance Economic Importance Data sets (past and current) Data sets (past and current) Data Analysis Data Analysis Conclusion Conclusion

3. 3 Car and Truck Sales Published by: Motor Vehicle Manufacturers and Importers Published by: Motor Vehicle Manufacturers and Importers Frequency: Monthly Frequency: Monthly Period Covered: Prior month Period Covered: Prior month Market significance: moderate (due to frequency) Market significance: moderate (due to frequency) Leading indicator of economic activity. Undergoes revisions. Leading indicator of economic activity. Undergoes revisions.

4. 4 What is it? Auto and Truck Sales measure the monthly sales of all domestically and foreign produced vehicles. Auto and Truck Sales measure the monthly sales of all domestically and foreign produced vehicles. Important indicator of consumer demand, accounting for roughly 25% of total retail sales. Important indicator of consumer demand, accounting for roughly 25% of total retail sales. Demand for big ticket items such as autos and trucks tends to be interest rate sensitive, making the motor vehicle sector a leading indicator of business cycles Demand for big ticket items such as autos and trucks tends to be interest rate sensitive, making the motor vehicle sector a leading indicator of business cycles

5. 5 What is it in the report? Provides unit data Provides unit data On unadjusted and seasonally adjusted auto and truck sales On unadjusted and seasonally adjusted auto and truck sales Domestic auto production Domestic auto production Canadian and Mexican auto imports, auto exports, and Canadian and Mexican auto imports, auto exports, and Domestic auto inventories. Domestic auto inventories.

6. 6 Why is it important? 25% equals to a large percentage of annual total retail sales (annually adjusted). 25% equals to a large percentage of annual total retail sales (annually adjusted). It’s a good reflection of consumer spending, which accounts for nearly two-thirds of all economic activity. This monthly report provides significant clues as to the pace of quarterly gross domestic product (GDP), one of the primary indicators used by the Federal Reserve in setting monetary policy. It’s a good reflection of consumer spending, which accounts for nearly two-thirds of all economic activity. This monthly report provides significant clues as to the pace of quarterly gross domestic product (GDP), one of the primary indicators used by the Federal Reserve in setting monetary policy.

7. Impact on the Economy 7

8. 8 How is the data gathered The individual vehicle manufacturers report their sales results during the first three or four days of the month. The individual vehicle manufacturers report their sales results during the first three or four days of the month. A day after the last manufacturer reports the Bureau of Economic Analysis (BEA) releases its estimate of unit auto sales. A day after the last manufacturer reports the Bureau of Economic Analysis (BEA) releases its estimate of unit auto sales. About a week after that the BEA releases its estimate of unit truck sales. About a week after that the BEA releases its estimate of unit truck sales. The Census Bureau releases its retail sales report, including a measure of sales at automotive dealers, usually around the 13th of the month. The Census Bureau releases its retail sales report, including a measure of sales at automotive dealers, usually around the 13th of the month. Roughly two weeks after that the BEA releases its personal income and outlays release, including a measure of spending on motor vehicles and parts. Roughly two weeks after that the BEA releases its personal income and outlays release, including a measure of spending on motor vehicles and parts.

9. 9 Latest Release Auto Sales Auto Sales Continued decrease in domestic vehicle sales: Continued decrease in domestic vehicle sales: Autos (all passenger cars, including station wagons): Sales are down.084* units from the previous month (April). Autos (all passenger cars, including station wagons): Sales are down.084* units from the previous month (April). Light Trucks (trucks up to 14,000 pounds gross vehicle weight): Sales are down.472* units from the previous month (April). Light Trucks (trucks up to 14,000 pounds gross vehicle weight): Sales are down.472* units from the previous month (April). Heavy Trucks (trucks more than 14,000 pounds gross vehicle weight): Sales are down.052* units. Heavy Trucks (trucks more than 14,000 pounds gross vehicle weight): Sales are down.052* units. (* in thousands)

10. 10 Latest Release Auto Sales [Seasonally adjusted at annual rates (Millions)] DomesticForeign Mar.Apr.∆Mar.Apr.∆ Autos5.1045.02-0.0842.4732.303-0.17 Light Trucks 7.7117.239-0.4721.4161.450.034

11. 11 Historical Data

12. 12 Historical Data

13. 13 Data Analysis (historical) Truck sales ↑ car sales ↓ Truck sales ↑ car sales ↓why? Incentive of 0 APR financing, despite rising gas prices. → shift in consumer spending to domestic manufacturers (light trucks, trucks)

14. Data Analysis 2000 vs. 2007 2000 (recession) 2000 (recession) increase in MS → IR ↓ → C, I ↑ → loans ↑ increase in MS → IR ↓ → C, I ↑ → loans ↑ > consumer spending ↑ 2007 2007 high(er) IR → C, I ↓ → loans ↓ > consumer spending ↓

15. Conclusion Good gauge for economic well being Good gauge for economic well being > accounts to large portion of retail sales > accounts to large portion of retail sales > direct effect on other “branches” of the economy e.g. banking, loans, labor economy e.g. banking, loans, labor market, etc. market, etc. > strong correlation with actual IR

16. Thanks for your attention