We know the main PMI index weakened in April and the two most recent regional PMIs also disappointed (Phil Fed/NY Empire State) and March industrial/manufacturing output confirmed a weaker manufacturing picture. The most recent NFIB report, while showing improvement, was still decidedly gloomy.
Of note is the manufacturing data (seasonally adjusted) which has declined in 3 of the last 4 months.
The joker in the pack in my mind is auto production and I have commented on this before: motor vehicle parts orders and production are likely influenced by the large decline in purchases during the recession, but the scale of production going forward would need to reflect the dynamics of weaker economic growth. One should also have one’s eyes wide open with respect to the credit dynamics supporting the demand for new and second hand cars – see further reading below.
There is some research that suggests that car ownership is a function of middle class wealth dynamics – A new measure of the global middle class / In Search of the Global Middle Class: A New Index – and weak middle class wealth dynamics may well put a cap on car ownership rates going forward.
Regarding the data point that suggest the US has a smaller number of cars per capita, the Carnegie financed report states that the US data does not include light trucks, vans or sport utility vehicles – Be Careful With Statistics provides a figure adjusted for this exclusion. I would be wary of using the data to draw correct global car ownership comparisons.
Also, further reading –
Introducing the 97-Month Car Loan – “In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever, according to Experian Information Solutions Inc. Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months and there were even a few as long as 97 months. Four years ago, only 11% of loans fell into this category…..The percentage of subprime loans isn’t far below the record level of 2007, and the length of loans is growing,”
AUTO FINANCE A BRIGHT SPOT FOR U.S. LENDERS – “while credit markets are thawing across the board, lenders have eased credit conditions considerably for auto loans. In fact, the average credit score for new car loans has been declining steadily since peaking in 2009. (See Chart 3) What’s more, there has been a growing trend towards increased access to auto loans for subprime borrowers. By the third quarter of 2012, 42% of auto loans were subprime – up considerably from the low of 34% seen in 2009 and only a fraction below 2007 levels……investor demand for auto debt is on the rise, with auto-loan securities up nearly 60% from year-ago levels, making autos the biggest class in the assetbacked securities market.1 In turn, this allows lenders to extend even more financing……The new car market, however, is only part of the story. Used vehicle loans account for 60% of total auto loans, suggesting that this market played a key role in the performance of auto credit growth last year as well.”