Despite hefty incentives, light motor vehicle sales in July were down month-to-month for the seventh consecutive time this year. Sales crept along at an annual pace of only 15.54 million units. Excluding Katrina-dampened September 2005, this was the weakest monthly sales rate since June 2004. In the first seven months of 2007, light motor vehicle sales are down an annualized 12.03% -- the weakest July-over-December sales rate since 2003 (see table below).

Perhaps Detroit would actually welcome a strike by the UAW this September so they could cut costs and clean out some inventories!

Motor Vehicle Sales

On a year-over-year basis, it wasn't just the former Big Three that experienced falling sales - even Toyota and Honda posted declines, too. This suggests that something fundamental is going on with the venerable U.S. consumer. He and she are tapped out. Second-quarter's 1.3% growth in real personal consumption expenditures is looking more and more like the new reality.

Let's see, housing still is in the tank, consumer spending has downshifted significantly and business spending on equipment is barely growing. It's all good, mate. The remaining 17% of GDP is sure to soar enough to get economic growth back to potential, right? Don't bet on it.

By Paul L. Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2007 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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