Americans Really Can’t Afford to Drive Cars

CNBC via Yahoo says Americans are driving less.  I looked for the claimed source of this data at the Federal Highway Administration’s Office of Highway Policy Information.  The OHPI publishes monthly Traffic Volume Trends and the June 2013 report does show a -0.1% cumulative decline in vehicle-miles of travel (VMT) for 2013.  I don’t know where CNBC is referencing a report “released this week” because no such report is mentioned among the FHWA’s press releases for August.  I’m assuming they mean the monthly trends report.  Journalists need to start using hyperlinks to data sources, just like us bloggers.

CNBC/Yahoo also mentions a John A. Volpe National Transportation Systems Center study showing a decline in driving.  They don’t link to the report in the article. I found that Volpe report myself.  My readers gain intelligence when they follow the links to source material I diligently assemble. The report’s PDF version does indeed show that the relationship between real GDP and VMT is breaking down. I read this data as another indicator that the QE-driven fake growth in GDP does not reflect the real economy. Driving ability is a measure of quality of life. Helicopter Ben can print money but he can’t print cheaper fuel.

The crux of the CNBC/Yahoo article and the government’s data is that Americans don’t drive as much as in years past. The root cause is something that the Fed’s QE cannot mask. Americans are getting poorer and are unable to afford historical driving habits. The Volpe report mentions several factors: people lack jobs, cars and gas are more expensive, higher debt burdens prevent car purchases. The Fed’s monetary easing has not created real wealth to solve these problems. Median household income is lower now than it was at the beginning of the recession in 2007.  Americans are owning their cars longer, and there is evidence that the higher quality of US-made cars means they need not be replaced as often. Those higher-quality cars are still more expensive now than in years past.

I think it would be more fruitful to compare VMT to trends in household income rather than GDP if the longstanding correlation between driving and the national economy is breaking down. The automobile industry needs to figure out how poor Americans will afford the cars they produce.

About Anthony Alfidi 128 Articles

Affiliation: Alfidi Capital LLC

Anthony Alfidi is the Founder and CEO of Alfidi Capital. His firm publishes free investment research with honesty and humor.

Mr. Alfidi holds a Bachelor's degree in human resource management from the University of Notre Dame (cum laude) and an MBA in finance from the University of San Francisco. He is a life member of Beta Gamma Sigma, the academic honor society for business majors. He has been a private investor since the 1990s.

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