Current Economic Conditions

July auto sales might be viewed as the first solid indicator of an improving U.S. economy. But what does it really tell us?

Americans bought 995,000 light vehicles in July, a 16% increase over June and the best monthly report since August 2008. Domestically manufactured light trucks (which includes SUVs) lost market share but still achieved an 8% monthly sales gain. Sales of domestic cars, imported cars, and imported light trucks were all up more than 20% month to month.

If we’d seen these kinds of numbers in the absence of the cash for clunkers incentives, I would have viewed it as a strong suggestion that the economic recovery has begun. As is, I’m left wondering, and fundamentally not knowing, whether the auto figures signal the shift we’ve all been watching for, or sales stolen from September and October and delivered to July.

Another favorable indicator came from yesterday’s Manufacturing ISM Report On Business, whose July index was back up to 48.9. That’s still shy of the 50% point at which there would be as many establishments reporting things are getting better as say they are getting worse. But it’s much better than the very low readings we’d been getting previously.

On the other hand, disposable personal income, which had been trending up the past few months, dipped back down again in June.

So I wish we had something else besides the auto numbers that would indicate that things have started to get better rather than simply reassuring us that things are getting worse more slowly than they used to be. I’ll be watching Thursday’s unemployment claims and Friday’s employment report with unusual interest this week. But Phil Rothman, like other forecasters, is predicting we lost another 350,000 jobs in July, or two to three times the number we’d need to add each month just to keep the unemployment rate from rising.

Current economic conditions

Graphs:, FRED, FRED.

About James D. Hamilton 244 Articles

James D. Hamilton is Professor of Economics at the University of California, San Diego.

Visit: Econbrowser

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