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Home Publications Blogs Beat the Press Strong June Car Sales Make a Mockery of Consumer Confidence Measures

Strong June Car Sales Make a Mockery of Consumer Confidence Measures

Wednesday, 04 July 2012 10:50

The media waste far too much time reporting on various consumer confidence measures. These really are not a very good indicator of anything, they often just reflect the tone of reporting in recent weeks.

This is especially true of the future expectations index. This index is very volatile. Consumption is not. What does that tell us?

The current conditions measure is a bit better, but it is more a contemporaneous measure that a predictive one. In other words, if people are buying a lot this month, odds are that their confidence is high, but high confidence in June won't tell us how much people will buy in July.

Anyhow, the June car sales numbers came out yesterday and, as the Post tells us, they were surprisingly strong given the weak confidence measures. If there was ever a category of consumption that should be driven by confidence it has to be car sales. After all, it is pretty rare that someone can't put off the decision to buy a car for another six months. Also, people who are fearful about their economic prospects could always opt to buy a used car instead of a new one.

Anyhow, that does not seem to have been happening in June. People were buying cars at a pretty healthy rate even as they were telling the survey takers that they were worried about the economy. Remember this the next time you see a big story about consumer confidence rising or falling.

Comments (9)Add Comment
People Were Not Buying Cars at a Healthy Rate in June
written by Timothy, July 04, 2012 12:35
...at least not in a historical perspective. The per capita annualized sales rate in June was 4.5%. This is 16% below the historical mean. If this were June, 2008 it would be the lowest per capita monthly SAAR recorded since 1983. (By the way, the per capita SAAR in June, 2008 was 4.5%; having fallen month-on-month for the previous ten months. Press reports at that time did not describe auto sales as "strong" or "healthy")
America Is About
written by James, July 04, 2012 1:53

“For all its effort, Wall Street just can't seem to pull itself up by its own bootstraps to succeed. It needs the Fed's help. It's stuck in a cycle of welfare-like monetary policy.

It's ironic (and even a bit hypocritical) considering that many leaders on Wall Street and in Corporate America in general tend to me more politically conservative. Many business leaders are arguing for a freer market and less federal regulation of banks.
Too much government! Not enough "accountability!" It's about repealing "Obamacare" or cutting back on food stamps. People should fend for themselves.

Is it fair then that Wall Street banks -- those supposed free market advocates -- should continue to rely on the Fed's charity while their political proxies in Washington fight to hack away at the assistance that so many American families need in order to get by day to day? No. It is not.

To be fair, not everyone working on Wall Street is in favor of smaller government. And some uber-conservative Tea Party types and Libertarians don't think the Fed should be helping the market at all ... because they want to completely abolish the Fed.

Now that position is a bit extreme. And I am not saying that the Fed should sit back and do nothing and let the market completely fend for itself.

But for the many conservative, pseudo free-marketers on Wall Street who continue to look to the Fed for assistance -- and the lawmakers who represent them -- here's what I'd like:

Ratchet back your fight against the poor. Stop threatening to take away government assistance from people who need it to buy groceries, or so their kids can eat lunch at school or go get a medical check-up.
Quit saying that people should "pull themselves up by their own bootstraps" without taking a look at just how much the banks depend on government "handouts."
Sometimes things get really, really, dire and -- just like Wall Street -- people need their government's help in order to get by.

Let's remember on this Fourth of July that it's our government's central role to offer that assistance…”


Fewer people may be able to wait six months to buy a car
written by Justafed, July 04, 2012 4:17
As luck would have it (and I consider myself unlucky), I was one of the people buying a car in June. Not because I was so confident or felt that I could really afford it more easily than in May, but because the old car was completely shot. You can only defer the purchase of a needed item for so long before something gives (in this case...pretty much everything) and you have to act. Given how weak automobile sales have been since 2008, even with the reduction in miles travelled factored in, sales really do not have much place to go but up. Or at least this is what I keep telling myself, since I would benefit a lot from a stronger economy.
Not dead yet ...
written by David, July 04, 2012 6:44
Timothy,"pretty healthy" versus "healthy" versus "not healthy". The picture shows a recovering patient. And the increase is not as terrible as the.consumer con polls suggest. The drop off in sales at the end of May seems to have been a mere blip in a trend of slow recovery.
written by MacCruiskeen, July 05, 2012 10:07
Yes, qualitative terms like "surprisingly strong," "healthy," and "weak" can be tossed around easily depending on the story you want to tell. Even the relatively objective-sounding "historical mean" is subject to choosing how much history to include. And what does this number really mean? Are new autos being added to the national fleet (increasing cars per capita) or are older cars being retired? Are gas hogs being traded for more efficient cars? And why should we be happy that more cars are being sold when our streets are already overclogged with traffic?
graph from yahoo
written by david, July 05, 2012 11:40

This does not include this the June report, so there is an uptick at the end. Obviously a weak recovery, due to a lot of uncertainties thanks to our fearful leaders. Nonetheless, there's forward progress on the whole.
written by patsfaninpittsburgh, July 06, 2012 7:49
"Strong" auto sales....LOL

Who is this idiot writing this dung?

Sales are at "junk" rate. They were always going to return to this. Just look at "pre-owned" car prices.

written by urban legend, July 07, 2012 3:57
The data may be too blunt an instrument, but in theory the confidence comes before the purchase.
yup- meaningless
written by scott moore, July 09, 2012 12:23
In 2011 The Conference Board changed the survey. "The new design uses a probability-design random sample, post-stratification weights" process (The Conference Board). Actually there is break in the series, and a significant difference between the old and the new method results! The five questions they ask are:
1. Respondents’ appraisal of current business conditions.
2. Respondents’ appraisal of current employment conditions.
3. Respondents’ expectations regarding business conditions six months hence.
4. Respondents’ expectations regarding employment conditions six months hence.
5. Respondents’ expectations regarding their total family income six months hence.
With probability sampling one has to define a region of acceptance, part of the method. This "rule" may or may not be correct, nobody knows for sure. In addition to this fact, because the results are based on responses to statements, there is no way to test for accuracy. So although it may be fun to watch, it is meaningless.
Source: http://www.conference-board.or...367128.pdf

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.