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Goldman Sachs is warning of the “unpleasant trend” in US auto sales, after a number of car companies reported weak figures on Monday, with the sales pace in the US dropping 10 per cent since December* to 16.6m.
Fewer cars being scrapped, coupled with fewer adults learning to drive and subsequently owning a car, means that auto sales are set for further declines, said the bank’s analysts.
But they add that the trend, while negative for growth, is unlikely to have any great impact on the US economy:
“Consumer spending on motor vehicles and parts accounts for 2.6 per cent of GDP, but only about half of this consists of purchases of domestically produced new light vehicles (the rest is imports, used vehicles, and parts). Moreover, because of its medium-term nature, it is natural to spread the decline implied by our analysis over a lengthier period. If it occurs over the next 2-3 years, the drag on annualized GDP growth would average only about 0.05-0.10 percentage point per year.
“From a broader perspective, we remain quite constructive about the consumer. While the rise in inflation has been weighing somewhat on consumers’ real income growth, the job market is healthy and household balance sheets (auto loans account for less than 10% of household debt) remain solid. As a result, we continue to look for consumption growth to moderate to 2.5% this year.”
*Article amended to reflect drop is since December.