When German car sales exploded in 2009, fueled by government incentives, everybody knew there would be hell to pay in 2010. Sure enough, the market cratered in January and February. In March, new car registrations were down 26.6 percent, but at least, they had caught up with 2008 pre-carmageddon levels. So the thinking went: If the market continues that way, it might get back to its old normal, and the pull-forward theorists will be proven wrong. Then came awful April …
In April 2010, a mere 259,414 new cars were registered in Germany. That is 31.7 percent below April 2009. Granted, a drop was expected. But horrors of horrors: This April is 18.4 percent below the good old days of April 2008. Very few expected THAT. The chart looks ugly. It doesn’t bode well for European sales data for April, due out in a week or so.
Last year’s winners are this year’s losers. Small cars, which last year were seen to displace all other segments, are down 57.1 percent. Sports cars (+ 68.3 percent,) SUVs (+6.2 percent) and the upper middle class (+1.3 percent) are back from the dead. Brandwise, last year’s chumps are this year’s unexpected champs: BMW up 7.1 percent, Mercedes up 4.3 percent, and Porsche up 11.2 percent. People with money are tired of frugality.
Who would have thunk it: If Germans want to relish good April sales data, they have to look to America.
If you want Germany in April in all its statistical misery: Germany’s Kraftfahrtbundesamt offers the monthly report for download, but don’t look at the data on an empty stomach.
The rich cut back for a couple reasons, they didn’t want to look like total pigs while the rest of the world collapsed, they lost a lot of money in the market.
Over the last year they recovered most of what they lost and they are back to conspicuous consumption again.
However, the 20-25% that are not employed are not likely to follow the same trend and we are headed back down into the abyss again. It is just a matter of time before the auto market tanks hugely. I expect the current U.S. incentives will keep the U.S. market going for another few months, but then they will run out of customers.
So I guess the take-away for stimulus junkies is to revive Cash for Clunkers and the $8,000 mortgage tax credit for home buyers and get a good bubbly mini-spike going again.
Incentives such as Cash for Clunkers, Cash for Appliances and the Mortgage Credit do absolutely nothing for fundamentals other than pull demand forward and utterly distort the market.
These are programs that may prove somewhat effective when you have a supply/demand imbalance as in a normal recession, but they inflict serious harm when economies are in an INSOLVENCY (debt) recession, as we are in currently.
Expect home sales to absolutely crater come June, and as we’ve seen with auto sales, apart from the C4C period last year, they’ve fallen back to ‘normal’.
If you look at economic numbers (that have become utterly distorted thanks to every scheme to prevent default) what you’ll see is that so far in 2010 we’ve gained GDP through inventory restocking (which was necessary after the rundowns in 2009), but little in the way of true growth outside of those industries which have received huge shots in the arm: housing, autos, appliances, infrastructure.
Until the debt is paid down or defaulted upon we’re going to muddle through. The quicker our incompetent overlords in Washington start fighting the current battle instead of the last one, we might make some progress. Until then, the next few years are gonna be rough.