Slipping auto sales may tap the brakes on economy

A slowing auto-sales growth rate is why I am less bullish than most observers about overall GDP growth in 2014.

Robert Johnson, CFA 4 January, 2014 | 11:40PM

It was a dull week in financial markets as the S&P 500 showed a small 0.4% decrease, the U.S. 10-year Treasury bond remained just about flat with a 3% rate, and commodities, especially oil, continued to falter. Europe was a little stronger and emerging markets a little softer this week. Manufacturing data helped Europe while softer results hit China. Political issues in Turkey didn't help the emerging-markets indexes this week, either.

The economic data was a little thin, but both auto sales and pending home, two bulwarks of the recovery, were feebler than I had hoped. However, there were several pieces of good news this week, including still-strong purchasing managers' reports on manufacturing and a weekly shopping center reading of 3% growth, year over year. Case-Shiller Home Price Indexes showed 13.6% year-over-year growth, edging still higher, unlike some other home prices indexes that have begun to slip.

The auto data was particularly troubling as sales only managed to hit 15.4 million units, a sharp decrease from November's recovery high of 16.3 million units. Averaging the two monthly figures is probably a better representation of reality as Black Friday sales and a compressed holiday sales period this year hurt December sales. It's still hard to untangle the auto story with a dose of really bad weather complicating the analysis, considering I was already worried about the auto sector as inventories, especially of cars (truck data is harder to come by), have been building for some time. Incentives also appear to be on the increase, and consumers are beginning to smell blood.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.