TALF and Car Sales
By Tony Crescenzi
RealMoney.com Contributor
4/1/2009 2:57 PM EDT
Sales of domestically produced U.S. vehicles ran at a 7.0 million pace in March, according to Market News. That's 500,000 more than expected and the best since December. A year ago the pace was 11.0 million, which underscores the idea that while the direction of sales has changed, the magnitude of the change is small. Still, the change in direction from down to up is important, and it will help feed the idea that a trough is developing for the current downturn.
I have emphasized often over the past two months that the TALF would underpin the sale of goods, including automobiles, and it appears that the first disbursement of the TALF in late March may have helped sales. I noted earlier, for example, that Ford (F - commentary - Cramer's Take) issued $3 billion of TALF-eligible securities and Nissan (NSANY - commentary - Cramer's Take) issued $1.4 billion, amounts that support the sale of many tens thousands of vehicles.
If the sales gains are sustained, a variety of economic data will begin to look better. It is inevitable. Note, for example, that the production of automobiles ran at a skimpy 3.83 million pace in January and 4.73 million in February -- well below sales. Eventually, low levels of production relative to sales will force manufacturers to raise output, lest manufacturers risk losing market share. With it, a variety of manufacturing-related data will turn, boosting investor sentiment in the same way that it was boosted today on reports of better sales data.
Notable is the fact that riskier assets fared better today even though ADP reported a big decrease in jobs for March. The day's events illustrate how investors will turn their backs on employment data when more forward-looking data indicate improvement, as today's car sales data did. |
