Weak Drivers of Retail Spending Demand Attention

The steady recovery in the Big Three automakers’ domestic car sales has been one of the unexpected success stories of the post-recession period. While the appropriateness of the industry’s bailout by the US and Canadian governments can be debated, the subsequent increases in sales volume, hiring, and company valuations have exceeded all but the most optimistic expectations.

The impact of new car purchases can be seen in pocketbooks (personal income in Michigan grew last year at its fastest pace since 2000) and in the national retail-spending tally. Rising about 7 percent from a year earlier, autos and auto parts accounted for one in five US retail dollars in February. The relative robustness of the auto sector has been sufficient to factor into the economic accounts, as well, where it made a outsize 0.83 percentage point contribution to the fourth quarter’s 3.0 percent annualized GDP reading.