Low used car sales ring alarm bells in USA
At first glance it looks like the car market may count on a healthy future. The American economy continues to grow at a satisfying rate, while more and more Americans are finding a job. More jobs also mean more cars to be bought. Elsewhere in the world, Chinese auto sales fell sharply last month, but the latest economic indicators published related to China gave some room for optimism. Maybe the bottom for the Chinese economy has already been reached. On the other hand the European economy is growing at a relatively slow pace. The European Central Bank has already announced extra measures to stimulate economic growth. The general outlook for the international auto industry doesn’t look that bad after all…
What will the American central bank do?
However, some dark clouds are gathering on the horizon and may come our way. The auto sector probably has its best years behind it. The American central bank wants to increase its base rate once again this year, if possible even twice. If money becomes more expensive, economic growth will inevitably slow down, because companies will have to pay more interest when they lend money. Slower economic growth means car sales will come under pressure. It is important to know the American economy is currently the driving force behind the world economy. Slower growth in the US will also make the world economy grow at a lower rate. With, in the end, a global drop in auto sales as a result.
American auto sector is already weakening
The American auto sector is already weakening, which in the first place is immediately clear when stocks of unsold cars are observed. In addition, sales fell surprisingly over the month of March. According to the analysts, the remarketing channel is in particular ringing an alarm signal about the health of the auto sector. Prices for used vehicles are under pressure and the situation is beginning to greatly resemble what we saw in 2008. That year the global economy ended up in a deep crisis and a number of auto companies almost went bankrupt. We have not yet arrived at a situation comparable to 2008, but it is vital to be vigilant. If things start to go wrong, they could do so at an alarming rate.
| 29/04/2016 | Jos Sterk