Automobile production figures through Q1 were released this morning. I pay close attention to these numbers as contractions in automobile production has tended to lead recessions (see below).
Gray bars indicate recessions. Blue line is monthly production figures. Orange line is annual.
Per CNBC: “Motor vehicles and parts production dropped 2.5 percent last month after increasing 2.3 percent in February. An inventory overhang in the automobile sector is weighing on production, contributing to factory employment declining in March for the first time since July 2017.”
Part of the issue is that new car inventories are building to multi-year highs per respected trade publication, Automotive News. This often causes manufacturers to increase sales incentives, which leads to lower margins. If manufacturers cannot quickly move the inventory then they must cut production which can lead to factory worker layoffs.
Currently, new car inventories represent 70-day supply. Ford and GM have introduced new sales incentives including 0% financing for 72 months on new trucks! As noted by automotive industry analyst, Daniel Ruiz, “It might be Truck Month for a while…”
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