Barron’s Does It Again
By Tyler Durden
Has there ever been a more ill-timed example of the curse of the Barron's cover than this?
After months of “strong” sales, rising prices, and Phil-LeBeau-gasms, Barron's decides that – following the biggest used-car price plunge since 2008, amid a drastic drop in sales, and near-record high inventories – now is the time to print this…
RBC recently asked if the automakers were “the card that brings the whole house down,” as Alhambra's Jeffrey Snider asked rhetorically, “will autos be the recession trigger?”…
What is most amazing about the current “manufacturing recession” is that it has occurred while automobile production has remained rather stout. That would suggest the state of production beyond motor vehicles is much worse than the headline contraction rates. However, that might all be changing as we know “something” is amiss in the auto segment. Inventories of all kinds of vehicles have piled up especially on the wholesale level, leaving channels stuffed to a degree not seen since the worst of the Great Recession.
As inventories rose, auto production stumbled on both the domestic and import side. US production, or the Fed’s data series within Industrial Production counting motor vehicle assemblies, showed a sustained drop that began around August. That is, of course, likely not coincidence given that it is coincident to the “global turmoil” policymakers have referred to of late as a benign pretext in substitute for the previously benign “transitory.” Assemblies rebounded somewhat in February, but inventory remains downright repulsive and even that upturn in production may be nothing more than the usual monthly variation.
Benchmark revisions in the data released this month have taken some of that volatility out, but it still leaves questions about where auto production is heading not just on its own terms but relative to the overall engrossing slowdown and manufacturing recession.
The problem is not just the disparity suggested by inventory, as the inventory surge these past few months is itself being driven by an actual and serious setback in overall motor vehicle sales. In other words, it seems something altogether different than a more benign scenario where car and vehicle manufacturers have had to slow production temporarily in order for sales to catch up; vehicle sales are actually tanking.
Sales have been quite robust as, again, autos have been about the only bright spot in this recovery and especially during the slowdown portion of it. Peaking in October and November at 18.6 million units SAAR, the level of sales has dropped by an astounding 9% to just 16.9 million in March – with sales falling 1 …read more
Source: Barron’s Does It Again
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