Economics, Weather and Auto Industry Forecasting

Second only to economics and perhaps weather forecasting, making predictions about the auto industry is still a chancey bet.

Today, against the odds, with gas prices cresting $4 per gallon and the intensive care status of the middle class, the auto industry continues to be one of the leading indicators of a robust economic recovery.

In February the US seasonally adjusted annual auto sales rate jumped to an astonishing 15.1 million cars. In the glory days before the re-financing bubble burst, US car sales had reached a remarkable level of nearly 17 million annually.

But those high levels were supported by generous incentives, rebates, and employee pricing — as well as an easy credit environment. Today’s automotive market flourishes without any of those gimmicks. To some extent pent-up demand is at play here, as are the residual effects of the cash for clunkers program of 2009 which took about a million vehicles out of circulation.

Ultimately what is driving the bull market on wheels is the quality of the selection. America’s legendary love affair with the automobile was on hold for a few years but has come back because the car companies are showing some love — offering great value, performance and quality industry-wide.