Auto Sales Aren’t Nearly As Strong As Reported

Steve Goldstein recently reported for MarketWatch that closely watched auto sales were leading economists to be more confident in their economic outlook for the rest of the year. To wit:

“Motor vehicle sales reached a seasonally adjusted annual rate of 17.45 million in March, up from 16.57 million in February, according to data from Autodata. That’s the highest reading in three months and represents a recovery from a downbeat start to the year. The MarketWatch-compiled consensus expectation was for a 16.8 million rate.”

Jim O’Sullivan of High-Frequency Economics also made a similar point.

“The data reinforce our view that the slowing in retail sales through February was exaggerated.”

Of course, the March retail sales report out last week was led primarily by a pickup in auto sales as well as gasoline prices. (About 60% of the entire increase in retail sales came from these two components.)

There is an interesting dichotomy currently occurring within the economy. While consumer confidence, as reported by the Census Bureau, soared to some of the highest levels seen since the turn of the century, the hard economic data continues to remain quite weak. As noted by Morgan Stanley just recently:

“Compare the New York Federal Reserve Bank’s current 1Q GDP tracking vs ours – FRBNY is currently tracking 1Q GDP at 3.0% versus us around 1%. The difference is larger than usual and is being driven by the fact that the New York Fed incorporates soft data into its tracking (attempting to tie it econometrically to GDP, a very hard thing to do especially in real-time). Our method translates the incoming hard data into its GDP equivalent. Note that the Atlanta Fed’s GDPNow tracking also focuses on hard data and is currently tracking 1% for 1Q GDP.”