March 2, 2011
Auto Sales Up, GM Stock Down; Gas Prices Up, Auto Sales Steady?
The Detroit Free Press reports that February auto sales for 2011 were up 27% compared to the same month the year prior, and they were at the highest level since August 2008 if you take out the cash-for-clunkers boost of August 2009. (Note on cash-for-clunkers incentives: whether that was a good investment remains a question, but whether it worked to boost sales is not.)
General Motors sales were up 46.4% from last year, but the stock fell below $33 for the first time since its offering last fall. Why? At least in part because GM used incetives of about 2.5% above the mean to boost their own sales. (Note on GM incentives: These, too, worked to boost sales, but sales aren't all that matters.) With desires to sell the government's remaining stake in GM this year, this will be watched closley by analysts, the government, and taxpayers alike.
Another thing to watch: gas prices. As the Free Press reports,
After a robust sales month in February, automakers and analysts say they don't expect rising gas to stall the auto industry's expected recovery this year unless the price zooms past $4 per gallon.
Unless? I think they mean when. Unrest in the MIddle East, increasing demand globally, and (hopefully) an improving economy are likely to lead to price increases. Average gas prices in the United States are already at $3.38, and it's still cold. I've been hearing rumors of "$4 by the Fourth (of July)" for gas prices, and I frankly am starting to think we could see $4 per gallon gas for the Memorial Day weekend.
I don't think prices will stay that high, at least initially, and I don't think people will freak out the same way (or at the same level) they did last time, either. It will level off auto sales, and perhaps shift the types of sales to some degree, but I don't think it will be devastating to the industry or the economy.
I do think that the days of oil at $60 or less per barrel are over, and I'll be shocked to see if it gets much below $80 per barrel for any period of time. That should mean long-term health for oil and gas producing states, anyway.
I have no emprical evidence to back any of this up (and as a law professor, perhaps I shouldn't). It's just what I think based on my read of the market and recent actions of market particpants. Time will tell if I have this right -- and now that it's on the internet, I am sure someone will be sure to let me know if I got it wrong. (Incidentally, I'd be fine with being wrong on the Memorial Day thing.) Thanks to one of my co-bloggers, they'll probably already have the term they'll use, too.