When it Comes to Consumer Spending, There’s Automobiles, and...

Have a look at retail sales. They have been fairly soft, disappointing, or whatever measured phrases like “OK, not terrible, but not great” that analysts and commentators favor to indicate mediocrity. Nearly all consumer spending reports are showing soft to flat data.

There is one notable exception, however, and that’s automobiles. Cars and light trucks purchased for homes and businesses are selling at a record pace — a run rate of more than 18 million vehicles this calendar year.

Why is that?

Aside from the generally improving U.S. economy, there are three reasons we can point to: falling gas prices, the aging of America’s auto fleet and credit availability.

Falling gas prices affects both the kind of autos purchased as well as total sales. When gas prices drop substantially, sales of hybrids and smaller, more fuel-efficient vehicles tend to fall, while larger, less-efficient sport utility vehicles, trucks and large sedans see more sales. A Bloomberg analysis from last year shows it takes decades to make up the premium cost of a hybrid over a comparable conventional fuel-efficient compact. With the exception of Teslas, electric car sales fall, too (though some claim that plug-in cars have not been especially impacted by falling gas prices).

Data from Autodata Corp. show that through August of this year, U.S. auto dealers sold nearly 600,000 more SUVs and pickups than in the first eight months of 2014, and almost 168,000 fewer cars. Consumers with more cash in their wallets are buying more vehicles; of those increased purchases, we see larger vehicles — which thrills manufacturers, as these have much higher profit margins as well.

Perhaps part of the reason for this increase is the age of the 254.4 million vehicles on America’s roads. In 2007, the overall median age of an automobile in the U.S. was 9.4 years, a significant increase over 1990 (6.5 years) and 1969 (5.1 years). While automobiles today are of better quality and, therefore, last longer, that does not completely explain the recent big jump in the age of the fleet.

 

Continues Here: Retail Looks Meh, Unless You’re Selling Cars

 

 


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