Two swallows

This week has seen more downbeat news on US auto and housing sales.
Ford said their total August vehicle sales were down 14% versus August 2006, and that their car sales were down by an amazing 34%. Toyota, who have been growing market share, said they were down 2.8% in total, and that their car sales were down 8%. GM bucked the trend with total vehicle sales up 5%, although they didn’t break out car sales, and did note there had been a ‘double digit decline in daily rental sales so far this year’. Chrysler, who mainly focus on trucks, said their sales were down 6%.
The accompanying comments to the sales figures were also concerning, with words such as ‘challenging’ and ‘competitive’ being used to describe current market conditions. Typical was Jim Lentz, EVP of Toyota, who said that ‘reduced credit tied to the subprime squeeze challenged consumer confidence this month’.
Housing is the other main driver for US chemical demand, and here the National Association of Realtors (NAR) posted a worrying 12% decline in their index of pending home sales for July, even before August’s turbulence. The NAR regard the index as a forward-looking indicator, and its fall prompted them to sound an unusually downbeat note about prospects, saying that ‘existing-home sales are likely to decline in coming months as mortgage disruptions work their way through the housing market’.
Early news on August sales from key retailers such as Wal-Mart also confirms that ‘price leadership initiatives’ are proving important in maintaining sales volumes. So July and August seem to be indicating that more difficult times may lie ahead. In the English countryside, the movements of migratory birds are often used as a sign of the changing seasons, although a rustic proverb reminds one that the mere sighting of ‘two swallows’ doesn’t necessarily indicate the arrival of summer.
Similarly, one does need to be cautious in predicting a downturn, based on the sighting of a slowing in retail markets over just two months. But unless there is a significant improvement in September, we will probably have to accept that the good times have already ended.

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