July 16, 2012
U.S. auto sales continue bullish while Canadian incomes languish
ALEX CARRICK
Chief Economist, CanaData
Defying some of the recent gloom about the economy, U.S. light vehicle sales in June rose again after declining in May.
The seasonally-adjusted annualized sales figure in the latest month was 14.08 million units, according to Autodata, a leading provider of statistics for the industry.
May’s level of auto sales was 13.78 million units. The numbers were higher earlier in the year, with January (14.18), February (15.10), March (14.37) and April (14.42) all above June’s figure.
The monthly numbers in 2011 weren’t nearly as bullish.
Light vehicle sales in the first half of this year were +14.8% compared with the initial six months of last year.
Individual-month-of-June sales versus the same month of last year were even stronger, +22.1%.
Auto sector demand is more than holding its own. What about some of the individual producers — especially those that needed government bailouts during the harsh times several years ago?
Chrysler LLC is having an outstanding year. Year to date in June, its sales were +30.3% versus the first six months of last year. June 2012 deliveries relative to June 2011 were +20.3%.
Fiat has expressed an intention to raise its ownership stake in the company.
General Motors Corp. didn’t fare as well as Chrysler year to date, +4.3%, but its individual month of June was nearly as strong, +15.5% compared with June of last year.
Ford Motor Company — the sole member of North American’s former Big Three that survived the downturn intact — was +6.6% year to date and +7.1% June 2012 versus June 2011.
The automakers that made huge headway in the latest month were the Japanese giants. A special reason lies behind the improvement. Last year’s numbers were horrendous.
Shipments from Japan ground to a halt in the second quarter of last year. Tsunami damage north of Tokyo took some production off-line and closed seaports.
Toyota’s sales were +28.7% year to date, but a stunning +60.3% in June of this year versus June of last year.
The pattern was similar for Honda, +15.4% year to date and +48.8% June 2012 over June 2011.
The other standout company so far this year has been Volkswagen. With a huge plant in Mexico, American orders have been filled to the tune of +30.4% year to date and +32.1% this June versus last June.
The German luxury car makers aren’t achieving the sales gains perhaps expected based on the drop in value of the Euro versus the greenback.
Daimler AG, with Mercedes-Benz in its stable, is +18.3% year to date, which is respectable but not industry-leading, and BMW is +10.5%.
The South Korean firms — Hyundai and Kia — have made sales gains this year, but generally near or below the national averages both year to date and June 2012 versus June 2011.
Auto sector sales are an important component of consumer spending. In the U.S., motor vehicle sales are 18% of total retail sales. (In Canada, the proportion is even higher at 23%).
While auto sales are holding up nicely in the U.S., consumer spending overall cannot be taken for granted. The latest consumer confidence reading from the Conference Board was a downer.
The June index level fell from 64.4 in May to 62.0 in June. It was the fourth month in a row of moderate decline.
Let’s keep the latest number in perspective. In the worst of the recession, the Conference Board’s consumer confidence index fell as low as 25.3 (February 2009), when the credit crisis was paralyzing the world economy.
The post-recession peak for the index so far has been 70.8, reached in February of this year.
Maintaining consumer spending as a driving force in the economy depends to a large degree on income levels that are improving.
Statistics Canada recently published data on the income of Canadians in 2010. While the time period covered is less current than one might wish, the results confirm what many of us have been suspecting.
Incomes have not been keeping up. In constant dollar terms, they’re hardly budging.
In 2010, the median (i.e., where half of the data points lie higher and half lower) after-tax income of families with two or more members was virtually unchanged for the third year in a row.
After-tax income is comprised of market income (earnings, private pensions and investment returns) plus government transfers (CPP, QPP, old-age security, etc.), less income tax.
The latest median income of $65,500 was comprised of median market income at $64,900 plus median government transfers at $6,500, minus median income tax of $8,200.
Because the foregoing figures are all medians, the math doesn’t exactly work out.
The $65,500 median after-tax income is for all families. The breakdowns by type of family and age bracket are quite interesting.
For example, the median income for two-parent families with children in 2010 was $78,800.
For non-senior couples without children, it was $64,900.
For families headed by a senior (aged 65 or older), $46,800.
And for female lone-parent families, the figure was $38,700.
The median after-tax income for unattached individuals was $26,000.
For senior families, government transfers made up more than 50% of after-tax income. For female lone-parent families, government transfers were about one-quarter of after-tax income. In both instances, income tax paid was minimal.
In the other sub-categories, more money went to government as income tax than was received back in support or other payments.
Regionally, the residents of Alberta ($78,100) had the highest after-tax incomes among all Canadians in 2010, followed by Saskatchewan ($70,100), Ontario ($69,300) and B.C. ($67,000).
Coincident with greater development of mineral and oil resources, Newfoundland and Labrador ($56,300) has been making income gains of late, but it still ranked last — barely, relative to P.E.I. ($56,400) and Nova Scotia ($56,800) — among the provinces in 2010.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
