U.S. Auto Sales Still in Depression; 25% Below Pre-Crisis Volumes

by: Peter Cooper

As if the continued poor news from U.S. housing is not enough, the recovery in U.S. auto sales continues to be anemic, with total sales in 2010 just about 75% of their 16.8 million annual level before the crisis.

A seemingly permanent loss of 25% of the single largest consumer sales item is surely the stuff of a depression, not a recession. And it is against this benchmark that any report of rising sales in December ought to be compared.

But Wall Street is looking for good news for a New Year rally, so do not expect too much realism from analysts. For the reality of 2011 will not be a great recovery; just more of the same bumpy road, unless the economy takes another whack from higher interest rates and falling financial markets.

Bond market yields point to a rise in the cost of consumer credit, and that will not be good for the auto sector in 2011. A double dip recession for the U.S. auto industry is perfectly likely. This chart reveals a sector that looks like it has fallen down a hole:

[Click to enlarge]

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.