Is 2011 going continue to be a good year for auto manufacturers? CC by cking/Flickr

U.S. auto sales in 2011 will be strong if January is any indication. U.S. automakers usually expect a slow January, but this year, year-over-year sales for the month were strong. The U.S. auto industry finished 2010 with strong sales and industry experts forecast a sustained upward trend in U.S. auto sales for 2011.

Back to normal in the U.S. auto industry

Nearly every U.S. automaker reported a significant sales increase in January, according to truecar.com, an auto industry sales and pricing website. There are many reasons why the U.S. auto industry is doing so well. These include all the new models, the higher consumer confidence, demand going up, the stable fuel prices and the low financing rates. New models include the Volt plug in hybrid from GM, the Chevy Cruze and the new Ford Explorer. Ford and General Motors rode those new models and a new public perception in manufacturing quality to the biggest sales increases among U.S. automakers.

Statistics of U.S. auto sales

It is also good for the industry that there were fewer fleet sales with discounts than in 2010. Households are starting to go back to dealer showrooms. A 22 percent increase in sales for year-over-year was recorded by General Motors. In January, a 9 percent increase in sales was recorded by Ford too. A 36 percent increase in individual buyers was shown by General Motors. Then, the largest year-over-year increase in 10 years for that category was shown by Ford with a 27 percent increase. A 23 percent increase in January was reported by Chrysler while a 15 percent increase was reported by Nissan. A 17 percent increase, which isn’t that great, was reported by Toyota because Toyota had to recall more than 10 million cars worldwide.

American auto sales going up

U.S. auto sales overall in January were about 17 percent higher than the first month of 2010. From January 2010, the amount sold went from 10.8 million to 12.5 million in December to a 12.6 million annualized rate. Across the U.S. auto industry, sales rose 11.1 percent in 2010 to 11.6 million vehicles. Automakers project U.S. sales of more than 13 million in 2011. Before the recession hit, U.S. auto sales hit 16.1 million in 2007.

Citations

New York Times

Bloomberg

Daily Finance

New reports on retail sales and consumer confidence present conflicting data until one reads between the lines. Image: CC Svadifari/Flickr

Retail sales and consumer confidence are key economic indicators closely watched by economists and investors. People often assume retail sales and consumer confidence would rise and fall in tandem. But separate reports released Friday show a strong 2010 retail sales trend followed by declining consumer confidence in January.

Retail sales surge in 2010

Retail sales in the U.S. increased at a greater rate in 2010 than in any year since 1999, according to the Commerce Department. From 2009 to 2010, U.S. retail sales increased 6.8 percent, the strongest growth since an 8.2 percent surge in 1999. December retail sales rose for the sixth month in a row, increasing 0.6 percent to $380.9 billion after rising 0.8 percent in November. Despite the holiday shopping season, December’s gain was less than expected, largely due to harsh winter weather. Department store sales dropped 1.9 percent, the steepest decline in two years. But online sales rose 2.6 percent month-over-month to ensure an overall monthly gain.

Consumer confidence a fickle index

Despite the strong retail sales trend, consumer confidence in January declined unexpectedly. The Thomson Reuters/University of Michigan consumer confidence index for January fell to 72.7 from 74.5 in December. A Bloomberg News survey of economists predicted a bump in the consumer confidence index to 75.5. Analysts are saying rising gas and energy prices, combined with the snail’s pace of job creation are to blame. Unemployment fell to 9.4 percent in December, but at the present rate of economic growth, the labor market will take years to recover. Higher gas prices increased sales at gas stations 1.6 percent last month. Energy prices rose 4.6 percent in December.

Data bode well for consumer spending

Consumer confidence has dropped so far this month, but economists say the consumer expectations index is a more accurate economic indicator. The consumer expectations index looks at how people feel about what their finances will look like six months down the road. The Commerce Department reports that it increased to 68.2, the highest mark since last June. The strengthening consumer expectations index bodes well for consumer spending, the lion’s share of U.S. economic output. Although recent reports offer conflicting information, the trend in retail sales appears strong enough to drive economic recovery, if not employment.

Sources

Bloomberg

Financial Times

Wall Street Journal

Credit cards were not among the forms of consumer credit that increased in November. (Photo Credit: CC BY-SA/Colin/Flickr)

Bloomberg reports that consumer credit rose for the second straight month in November, a sign that consumer confidence may be on the rise. The $1.3 billion November increase in consumer lending, paced by government-held student loans, followed a $7 billion increase in October.

Consumer credit increased in auto, education fields

Non-revolving loans such as auto loans and student loans were up by $5.6 billion, according to November figures. Revolving consumer credit continued its 27-month nosedive by falling $4.2 billion, which indicates that maintaining high interest debt over time is becoming less attractive to U.S. consumers. It also means that even though consumer confidence may be increasing, times when emergency cash is needed still lend themselves to products like payday loans rather than credit cards.

Positive economic signs, with more to come

Theresa Chen, a Barclays Capital Inc. economist in New York, reportedly told her clients that the road ahead will be long.

“Consumer credit is still rebounding off the bottom. This is broadly in line with the rise in household spending that we have already seen over the past few quarters,” she said.

Even though a full recovery is far away, November’s $1.3 billion consumer credit increase still outpaced the $500 million recovery many economists forecast for the month. This pleasant surprise, along with a larger than expected U.S. jobs increase and unemployment rate decrease to 9.4 percent, helped bolster the Standard & Poor’s 500 Index. The S & P 500 ended 2010 with a 13 percent gain.

November auto sales another positive sign

The November consumer credit increase translated into another good month of sales for the automotive industry. According to Bloomberg, auto sales hit a seasonally adjusted 12.26 million annual rate in November, followed by a further increase to 12.53 pace in December. Combined, the 37.04 million rate for the final quarter of 2010 was the strongest the auto industry has seen since 2008′s third quarter.

Sources

Bloomberg

A double dip in the housing market is imminent, analysts say, as home prices dropped further than expected in October. Image: CC johpan/Flickr

Home prices dipped lower than expected from September to October according to an industry report. The Standard & Poor’s/Case-Shiller home price index released Tuesday also reported that October’s plunge in home prices was the greatest year-over-year drop since December 2009. Analysts blamed the end of the homebuyer tax credit and warned of a double-dip in the housing market.

The Case-Shiller home price index

In October month-to-month home prices fell in 18 of 20 markets surveyed by the Case-Shiller home price index. Housing industry experts had predicted a flat October following a weak September. The decline in value hit faster and harder than expected after the end of the homebuyer tax credit last summer. Home prices in the 20 markets fell 1.3 percent from September to October, an annualized decline of 15 percent. Atlanta was hit hardest with a 2.1 percent drop in home prices. Five other markets, including Charlotte, N.C.; Miami; Portland, Ore.; Seattle and Tampa, Fla., hit all-time lows since the housing market collapsed in 2007.

Housing market double-dip

The chairman of the S&P/Case-Shiller home price index committee said the housing market is poised on the edge of the double-dip analysts have been warning about. Home prices in October have dropped 30 percent since peaking in July 2006. A backlog of foreclosures waiting in the wings will continue downward pressure on home prices in 2011. Inventory of homes for sale is up 50 percent over December 2009. Millions of homeowners planning to sell are standing by for signs that the housing market will recover.

Housing market winners and losers in 2011

The sustained decline in home prices is bad news for Realtors. However, news about a housing market double-dip is good news for homebuyers. The Case Shiller home price index reported that sales volume was down 25 percent from December 2009 as potential homebuyers wait for the housing market to bottom out. But there’s a catch. The depressed housing market is a drag on economic recovery as it is inextricably connected to high unemployment and low consumer confidence. Even though economists are optimistic about 2011 economic growth, home prices are expected to decline as much as 3 percent further in 2011.

Sources

Bloomberg

CNN

Wall Street Journal

Mortgage rates have been rising in parallel with private sector job creation, existing home sales and consumer confidence. Image: CC erion.shehaj/Flicr

Mortgage rates rose for the third straight week, according to both the Mortgage Bankers Association and Freddie Mac. Rising mortgage rates are accompanied by positive numbers from private sector job creation, existing home sales and consumer confidence. As mortgage rates rose after a prolonged period of historic lows, mortgage refinancing activity dropped off a cliff.

Mortgage rates still lower than last year

Fixed mortgage rates rose again this week as economic data showed the economy may turn out being stronger in the fourth quarter than the third. Freddie Mac reported that the rate on a 30-year fixed-rate mortgage averaged 4.46 percent as of Dec. 2, rising from 4.40 percent the week before. A year ago the fixed-rate mortgage averaged 4.71 percent. Rates for 15-year fixed-rate mortgages and adjustable-rate mortgages also rose from last week, but they remain considerably lower than they were at this time last year. Getting the average fixed-rate mortgage rate required a down payment of 8 percent of the mortgage amount charged as pre-paid interest.

Signs of economic recovery

The positive economic news driving mortgage rates higher includes employment, even though the jobless rate rose to 9.8 percent in the latest jobs report from the Labor Department. November private sector job creation was the highest in three years and has grown for 10 consecutive months. Markets interpret that as a positive outlook going forward. A report on pending existing home sales showed an 11 percent increase, even though prices still trend downward. The consumer confidence index also jumped to 54.1 percent in November, which showed with a surge in holiday spending.

Mortgage refinancing takes a hit

A side effect of rising mortgage rates is the apparent end to a mortgage refinancing window that homeowners took advantage of to the tune of nearly $1 trillion. Many people who may have thought they could benefit from record-low mortgage rates appear to be no longer interested in refinancing. The Mortgage Bankers Association reports that the volume of mortgage refinance applications dropped 21.6 in the last week.

Sources

Wall Street Journal

The Chicago 77

Christian Science Monitor

Consumer confidence posted a modest gain in August -- data that bumped stocks and eased concerns that anemic consumer spending will derail economic recovery. Charlie Brewer/Flickr photo.

The Conference Board’s monthly report on its consumer confidence index showed that the metric used to gauge economic outlook actually bumped up a couple of points in August. The modest gain gave the stock market a jolt into positive territory Tuesday morning.

Consumer confidence index beats forecast

Consumer confidence rose in August to beat predictions. Bloomberg reports that the increase in the consumer confidence index to 53.5 from a five-month low of 51 in July could be a sign the biggest part of the economy may avoid a further slide that could effectively end a stalled economic recovery. But even with the increase, an economist told Bloomberg that the August consumer confidence figure is at a “stunningly low level.” Even so, higher confidence brings a ray of hope that consumer spending — 70 percent of the U.S. economy — will recover. To do that, companies need to start hiring more. Yet according to the Labor Department, companies created an average of 51,000 jobs from May through July — down from 200,000 the previous two months.

Consumer confidence report details

In addition to the consumer confidence index, the Conference Board report contains other details. MarketWatch reports that more consumers are pessimistic about the present situation of the economy, yet optimistic that conditions will improve. The Conference Board’s present-situation index — a measure of attitudes about business climate and job opportunities — dropped to 24.9 in August from 26.4 in July. The expectations index — a measure of expectations for a better business climate and more job creation — rose to 72.5 in August from 67.5 in July. Consumers planning to buy a home within six months moved to 2 percent from 1.9 percent. People planning to buy a car rose to 5 percent from 4.7 percent. An economist told MarketWatch that despite the August gains, consumer confidence is at “incredibly depressed levels,” compared with previous economic recoveries.

Bump in index doesn’t guarantee consumer spending

A consumer confidence index above 90 indicates a healthy economy, according to the Associated Press. Yet the August bump put the brakes on a sliding stock market Tuesday morning. About two stocks rose for every one that fell on the New York Stock Exchange. Like all recent market rallies, this one is expected to be short-lived. Most economic reports show economic growth is slowing, and the slight uptick in consumer confidence doesn’t guarantee an increase in consumer spending. A high unemployment rate continues to motivate consumer saving and debt reduction — behavior considered virtuous from a personal finance standpoint. But until the job market recovers and people open their wallets, the late-summer slump could continue for the rest of the year and drag the U.S. economy into a double-dip recession.

The unemployment rate fell in June despite rising job losses because people are giving up looking for work -- conflicting indicators in an economic recovery struggling with a lack of jobs. Flickr photo.

The unemployment rate is the great ball and chain putting a drag on U.S. economic recovery. Its such a problem that even though the unemployment rate fell from 9.7 percent in May to 9.5 percent in June, more jobs were cut than were created. Jobless Americans dropping out of the labor force in droves skewed the stats in the jobs report. The stock market, accepting the numbers at face value, rose slightly Friday morning. But soon after a decline in factory orders was reported at 10 a.m., the Dow Jones Industrial Average lost 32.5 points. The turgid U.S. economy is full of conflicting information. Even as job creation, factory orders and consumer confidence fell, some manufacturing companies that want to hire can find workers with the kind of skills they need.

Unemployment rate, consumer confidence and everything else

The unemployment rate reverberates throughout the U.S. economy. An uncertain employment picture wreaks havoc on consumer confidence, which declined sharply in June. The decline in consumer confidence led to a decline in auto sales, and pushed pending home sales off a cliff as tax credits for home buyers expired. Consumer spending makes up 70 percent of the U.S. economy, and disposable income is a distant memory for millions of jobless workers.

Why the unemployment rate dropped:

The unemployment rate reached its lowest point since July 2009. But the Wall Street Journal reports that the decline wasn’t due to improvement in the labor market. A loss of 125,000 jobs should have increased June’s unemployment rate. But 652,000 people gave up looking for a job — the sharpest one-month decline in 15 years in the Labor Department’s survey. The Journal speculates that some could be choosing to pursue other options like school. Some are reaching the end of their unemployment benefits, which require an active job search. Whatever the reason, over the past two months almost 1 million people stopped looking for work.

New jobs a mismatch for many unemployed workers

The unemployment rate remains stubbornly high because plenty of people are still applying for the jobs. The New York Times reports that the problem is a mismatch between the kind of skilled workers needed and the ranks of the unemployed. During the recession, domestic manufacturers accelerated the long-term move toward more automation, laying off their lowest-skilled workers and replacing them with cheaper labor abroad. Now these companies need to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math skills  than old-school assembly line workers.

A silver lining in the jobs report?

One must dig deep to find some positives about the latest jobs report. The Washington Post reports that Friday’s jobs report could mean that the economic recovery that began last year has lost momentum, but the numbers are not so bad as to suggest the nation is heading into a double-dip recession. The numbers, although weak, show just how far the U.S. economy has fallen. The job growth number, for example, is a decline from stronger levels in March and April, but the June job creation number of a mere 83,000 is better than any month out of the past 31, other than the last two.

Weak retail sales contrasted with a rising consumer confidence report to narrow trading and reduce stock market volatility on Friday. Flickr photo.

Retail sales dropped in May, and the stock market dropped in step with data delivered by the Commerce Department retail sales report. Stock market volatility has become the new normal. The stock market rose at the end of the day Thursday before reversing direction early Friday when the May retail sales report was released. A schizophrenic market then seesawed throughout the day as conflicted investors weighed the negative retail sales report with an unexpectedly positive analysis of consumer confidence.

Commerce Department retail sales

Retail sales derailed the optimism of a late stock market rally on Thursday. The New York Times reports that Wall Street indexes fell Friday morning after the Commerce Department reported that retail sales decreased 1.2 percent last month, the largest drop since last fall. Five of 13 retail sales figure categories in the report decreased with the largest drop in building materials at 9.3 percent. Excluding sales to commercial fleets (overall auto sales increased in May), retail auto sales were down 1.7 percent.

Stock market volatility week

Despite all the recent stock market volatility, all three major indexes closed higher for the week. Stock prices dove in the last hour Monday (jobless report), rebounded Tuesday (reassuring words from the Federal Reserve), dove again Wednesday (political pressure on BP dividends) and bounced back Thursday (overseas economic reports). The Times reports that Friday’s session, its volatility tempered by the good cop/bad cop consumer confidence and retail sales reports, made the difference for the somewhat happy ending.

Consumer confidence report beats forecast

A few hours after the May retail sales report sent investors out of stocks and into bonds, the Reuters/University of Michigan consumer sentiment index for early June came in higher than expected at 75.5, up from 73.6 at the end of May and better than the 74.5 economists had been expecting. Forbes reports that the disparity between the retail sales and consumer confidence reports signifies that many Americans still feel that their personal finances are under stress while they see the overall economy to be on the mend and hope for better days ahead.

Retail sales silver lining

A deeper analysis of the retail sales report may explain why consumers on Main Street feel better than traders on Wall Street. Frank Ahrens of the Washington Post points out that even though retail sales dropped 1.2 percent from April to May, compared with May 2009 retail sales were actually up 7 percent. Ahrens goes further to say that when excluding negative numbers from bigger pieces of the pie taken by auto sales, building materials and gasoline (down 3.3 percent) overall retail sales actually rose 0.1 percent in May.

U.S. auto sales rose for the eighth consecutive month as credit thaws, consumer confidence increases and gas prices remain stable. Flickr photo.

U.S. auto sales jumped significantly in May, without a program like Cash for Clunkers, special tax breaks or any other government stimulus. Aided by a huge Memorial Day weekend, U.S. auto sales managed to finish the month 19 percent over May 2009. Analysts credit a rising consumer confidence index and lower gas prices for the increase in car buying. All U.S. automakers exceeded sales expectations for May, with SUVs making a comeback. Conspicuously lagging behind was Toyota, still feeling the negative effects of massive recalls earlier this year.

Car buying makes a comeback

The big increase in U.S. auto sales, like the consumer confidence index, is a leading indicator for an improving economy. The Associated Press reports that credit is loosening up for easy loans and gas prices are stable. Car buying rose despite an 8 percent decline in the stock market last month. U.S. automakers saw double-digit increases over the same month last year, when GM was headed into bankruptcy and Chrysler was already there. Foreign automakers also saw increases of 20 percent or more — except for Toyota, whose sales rose just 7 percent.

Rising consumer confidence, stable gas prices

U.S. auto sales statistics were fueled by a consumer confidence index that rose to its highest level since March 2008, according to  businessweek.com, which also reports that the daily national average of gasoline prices tracked by the American Automobile Association has remained less than $3 for more than 18 months. Gas prices contributed to the comeback in SUV sales like the Chevrolet Equinox and Ford Edge. Overall U.S. auto sales rose to 1.1 million, the eighth straight monthly increase, the longest streak in almost a decade, according to Bloomberg data.

Auto sales statistics

U.S. auto sales for General Motors, the No. 1 U.S. automaker, were up 17 percent compared to May 2009. CNNMoney.com reports that GM’s sales gains were led by a 32 percent rise in sales of four of the brands that survived its bankruptcy filing: Chevrolet, Buick, GMC and Cadillac. Sales of the brands GM shed as part of its bankruptcy were down 94 percent from a year ago, although those brands now make up less than 1 percent of the company’s U.S. sales. It has less than 1,500 of those brands’ vehicles left in inventory, most of them Hummers. Ford reported a 23 percent rise in sales at Ford, Lincoln and Mercury — although it announced that Mercury will be discontinued at the end of the year. Even Chrysler posted a 33 percent sales increase — although it virtually ceased production during its bankruptcy last May.

Auto sales: room for improvement

The recent run of U.S. auto sales increases is welcome news after four consecutive years of decline in the U.S. auto market through 2009. Reuters reports that major automakers expected overall sales to be about 11.5 million in 2010. That would be up from the 27-year low of 10.4 million sales recorded in 2009.

The Federal Reserve reported that an unexpected consumer borrowing increase in March is another sign that an economic recovery is underway. Flickr photo.

Consumer credit increased in March 2010, the Federal Reserve reported Friday. The $1.95 billion increase in consumer borrowing surprised economists, who had expected consumer debt to continue a decline that resumed in February after a January spike in money loans. The unexpected March consumer credit statistics mark only the second time the Fed has reported a consumer confidence increase in 14 months. Some believe that consumer spending, making up 70 percent of the economy, is trending to a level that could help strengthen economic recovery.

Consumer confidence on the upswing

News of the March consumer credit increase comes hot on the heels of a Friday Labor Department jobs report announcing that 290,000 jobs were created in April. The jobs increase was accompanied by an increase is the unemployment rate. However, the report said the improved economic outlook is motivating people who had quit looking for jobs during the recession to resume looking for work.

Consumer debt figures a surprise

The increase in consumer credit statistics surprised many economists. Bloomberg reports that a survey of 33 economists had forecast consumer debt in March would drop further from an $11.5 billion decrease reported in February. Projections ranged from a consumer debt decrease of $8.5 billion to an increase of $8 billion. Economists surveyed by MarketWatch expected consumer credit to decline by $4.5 billion in March. The March gain represents a 1 percent rise at an annual rate following a 3 percent drop in February and a 3.2 percent January increase.

Federal Reserve consumer credit statistics

Federal Reserve Consumer credit statistics show that non-revolving debt, including loans for cars and mobile homes, rose by $5.1 billion in March. Bloomberg reports that auto sales in the U.S. rose to the equivalent of 11.8 million annually in March — the strongest performance since August 2009, according to industry statistics. The pace had slowed to 11.21 million in February. Auto sales in March were boosted by Toyota incentives the company offered to make up for record recalls. Ford led U.S. automakers with a 40 percent sales increase. Sales at General Motors increased 21 percent.

Federal Reserve Consumer credit statistics for revolving debt, such as credit cards, fell by $3.2 billion in March. The central bank’s report doesn’t cover borrowing secured by real estate.

Consumer borrowing will fuel recovery

The low rate of personal savings in the United States has aroused a sense of alarm for years. But the Associated Press reports that in the wake of the great recession, economists now say that consumer debt needs to stabilize and grow to prevent derailing the modest recovery under way, although they expect that the rebound will be restrained by tighter credit conditions imposed by many banks.

Many people are unsure of the work the stimulus has created thus far.

A new study is showing that Americans are losing confidence because they see debt relief as a far off dream. According to a Washington Post/ABC News poll of 1,000 people, “Overall, 52 percent now say the stimulus package has or will succeed in restoring the economy, down from 59 percent two months ago.” Experts are saying that consumers are watching the economy and their personal finances closely to see signs of resilience. Logically, it’s the states that were hit hardest by the economy whose residents are the most pessimistic about the stimulus.

The effect of the stimulus

Part of the problem with the stimulus is its seeming lack of saturation to the personal level. Although the stimulus was $787 billion, the majority of the money is still working its way through large industry giants and corporations. It hasn’t yet reached the hiring level, where people would see the biggest advantage. Vice President Joe Biden said, “150,000 of the 3.5 million jobs that are supposed to be saved or created under the program are in place.” Most Americans, hearing these numbers, are despondent, rather than satisfied. Claire Montage of Hollywood, Calif., stated, “One hundred fifty thousand jobs is nothing compared to the millions of jobs needed. … I’m not going to get excited about less than a 10th!”

Montage’s sentiments are shared by the population. With a recent projection of the unemployment rate estimating to be well over 10 percent in upcoming months, many people are unimpressed with the work the stimulus has created thus far. People are reading signs and not seeing the huge changes the stimulus promised.

People want everyday changes to become apparent

Dr. John Fieldling, psychologist for Moser College, stated, “People do not believe what they can’t see. And, they can’t see many signs of a recovery, no matter how the media writes about it.” Mentality is everything with the public, and it would be difficult for them to believe that things are getting better when they are still struggling with unemployment, debt relief, making payments and finding extra cash. The lists of things that people are mentally focusing on are largely untouched by the stimulus. Stimulus money may be helping large corporations restructure, but homeowners aren’t seeing the immediate benefits.

The Obama administration wants to find some consumer support and confidence. However, that’s a difficult task. Economist Larry Rudd stated, “People are not going to take well to hearing about large corporations recovering…they want to be able to pay bills and see prices come down in the supermarkets. They want everyday changes to become apparent.” This is the key to gaining support. If the Obama administration is to gain consumer support, it will take time. There has to be enough time for the stimulus to work its way through the layers of the market and reach the consumer level. Rudd added, “It will take time for visible signs of recovery.”

Economic recovery

Consumers are losing their confidence because of the growing unemployment rate, prices of goods and consistent problems with debt relief. Their everyday struggles are compatible with a negative assessment of the economy and its lack of growth. In turn, that contributes to a negative assessment of the stimulus. Only time will tell whether or not consumers will change their views of the stimulus, but one thing is for certain — until they see the actual changes, people won’t be satisfied.

Need extra cash? Start your quick loan application HERE!