the economy, auto sale & auto auctions dr. ira silver
TRANSCRIPT
THE ECONOMY, AUTO SALES & AUTO AUCTIONS
Dr. Ira SilverNAAA Economist
Slow Real GDP Growth
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 22008 2009 2010 2011 2012 2013
-11.0
-9.0
-7.0
-5.0
-3.0
-1.0
1.0
3.0
5.0
7.0
0.3
3.1 2.7
1.5
-2.7
2.0
-2.0
-8.3
-5.4
-0.4
1.3
3.9
1.6
3.92.8 2.8
-1.3
3.2
1.4
4.93.7
1.2
2.8
0.11.1
1.7
Percent Change From Prior Quarter at Annual Rate
Recession
Percent Change From Prior Year
Is this all bad?
Slow Growth Does Not Quickly Create The Excesses That Lead To Recessions
67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 122.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
RecessionUnemployment Rate
Recessions are preceded by very low unemployment
And the economy is growing
Institute for Supply ManagementIndexes Indicate Continued Growth
Three-Month Moving Averages
78798081828384858687888990919293949596979899000102030405060708091011121325.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Recession
Manufacturing Activity
Recession Level
Nonmanufacturing Activity
Employment Is GrowingChange (thousand of Jobs)
1 3 5 7 9 11
1 3 5 7 9 11
1 3 5 7 9 11
1 3 5 7 9 11
1 3 5 7 9 11
1 3 5 7 9 11
1 3 5 7
2007 2008 2009 2010 2011 2012 2013
-1,000
-800
-600
-400
-200
0
200
400
600
Recession
Auto Sales Recover
(MILLIONS OF UNITS, SEASONALLY ADJUSTED AT ANNUAL RATE)
79808182838485868788899091929394959697989900010203040506070809101112138.0
10.0
12.0
14.0
16.0
18.0
Recession
Light Vehicle (right scale)
Auto Sales Recover
(MILLIONS OF UNITS, SEASONALLY ADJUSTED AT ANNUAL RATE)
Housing Recovery Starts
79808182838485868788899091929394959697989900010203040506070809101112130.2
0.7
1.2
1.7
2.2
8.0
10.0
12.0
14.0
16.0
18.0
Recession
Housing Starts (left axis)
Light Vehicle (right scale)
Households Reduce Financial Obligations
Financial Obligations as a Percent of Disposable Personal IncomeBack to Early 1980s Levels – Consumer Spending Will Grow
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 1310.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
Recession
Household Wealth RecoversSupports Future Spending
Stock Prices Surge & Home Prices Turn Up
33239332703329833329333593339033420334513348233512335433357333604336353366433695337253375633786338173384833878339093393933970340013402934060340903412134151341823421334243342743430434335343663439434425344553448634516345473457834608346393466934700347313475934790348203485134881349123494334973350043503435065350963512535156351863521735247352783530935339353703540035431354623549035521355513558235612356433567435704357353576535796358273585535886359163594735977360083603936069361003613036161361923622036251362813631236342363733640436434364653649536526365573658636617366473667836708367393677036800368313686136892369233695136982370123704337073371043713537165371963722637257372883731637347373773740837438374693750037530375613759137622376533768137712377423777337803378343786537895379263795637987380183804738078381083813938169382003823138261382923832238353383843841238443384733850438534385653859638626386573868738718387493877738808388383886938899389303896138991390223905239083391143914239173392033923439264392953932639356393873941739448394793950839539395693960039630396613969239722397533978339814398453987339904399343996539995400264005740087401184014840179402104023840269402994033040360403914042240452404834051340544405754060340634406644069540725407564078740817408484087840909409404096941000410304106141091411224115341183412144124441275100
120
140
160
180
200
220
300
500
700
900
1,100
1,300
1,500
1,700Recession
House Price (right axis)
S&P500 Stock Price (left axis)
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 -
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Nonfinancial Corporate Cash
Bank Excess Reserves
Corporate Profitability At Record LevelsWill Support Business Investment & Hiring
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 113
4
5
6
7
8
9
10
Recession
After-tax Profit Margin
Other Economic DriversContinued Monetary Stimulus If Needed
“the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent”
Other Economic DriversContinued Monetary Stimulus If Needed
“the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent”
Other Economic DriversContinued Monetary Stimulus If Needed
“the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent”
Other Economic DriversThe World Is Looking Better
Other Economic DriversU.S. Energy Production Soars (Quadrillion BTU)
00 01 02 03 04 05 06 07 08 09 10 11 12 131.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
0.8
0.9
1.0
1.1
1.2
1.3
1.4
Natural GasOil
Other Economic Drivers
A potential game changer!Federal Energy Regulatory Commission
Natural Gas PricesDollars per Thousand Cubic Fee
Better Times Are Ahead! Real GDP Percent Change
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
-0.3
-2.8
2.51.8
2.81.5
3.02.0
3.5
Auto Sales Recover (MILLIONS OF UNITS, SEASONALLY ADJUSTED AT ANNUAL
RATE)
79808182838485868788899091929394959697989900010203040506070809101112138.0
10.0
12.0
14.0
16.0
18.0
Recession
Light Vehicle (right scale)
Auto Sales Drivers
• Pent-up demand created during recession• Continued easy/cheap credit • Low household debt service burden• Household wealth increasing• Improving labor market• New attractive, fuel efficient vehicles• Housing construction increasing
New Vehicle Sales Continue Strong Recovery
Millions of Units
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
16.6 16.9 16.9 16.5 16.1
13.2
10.4 11.612.7
14.415.6
16.7
-1%1% 0%
-3% -3%
-18%
-21%
11% 10%
13%
8% 7%
New Vehicle Sales Percent Change
AUCTION UNIT VOLUMEPERCENT CHANGE FROM PREVIOUS YEAR
1 2 3 4 1 2 3 4 1 2 3 4 1 22010 2011 2012 2013
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Dealer Consignment Commercial Consignment TotalAuctionNet
Strong new car sales
AUCTION UNIT VOLUMEPERCENT CHANGE FROM PREVIOUS YEAR
1 2 3 4 1 2 3 4 1 2 3 4 1 22010 2011 2012 2013
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Dealer Consignment Commercial Consignment TotalAuctionNet
Weak past new car sales
Strong new car sales
AUCTION UNIT VOLUMEPERCENT CHANGE FROM PREVIOUS YEAR
1 2 3 4 1 2 3 4 1 2 3 4 1 22010 2011 2012 2013
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
9.4
Dealer Consignment Commercial Consignment TotalAuctionNet
Weak past new car sales
Strong new car sales
Strong past new car sales
Turnaround in Commercial Consignment Adds to Strong Dealer Consignment
Millions of Units Sold
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
10.0 9.7 9.4 9.5 9.5 9.58.9
8.37.7 7.9
8.49.0
4.6%
-3.0% -2.8%
1.2%0.3%
-0.6%
-5.9%-7.1% -7.6%
3.3%
6%8%
Units Sold Percent Change NAAA Survey, NAAA
Bottom LineBetter Times Are Ahead!
• The economic recovery will strengthen
• Auto sales will approach past levels
• Auction volume will increase this year and next– And probably further on
• Auctions need to ramp up to be able handle the increased business
THE ECONOMY, AUTO SALES & AUTO AUCTIONS
Dr. Ira SilverNAAA Economist
Used Retail Sales Continue RecoveringMillions of Units & Percent Change
Source: CNW Research, NAAA
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
43.6 42.7 44.1 42.6 41.4
36.5 35.5 37.039.0 40.5 42.6
44.1
1.3%
-2.0%
3.4%
-3.6%-2.7%
-11.8%
-2.8%
3.9%5.2% 4.5% 5.0%
3.5%
Used Vehicle Sales Percent Change