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Cash For Clunkers Raises August SAAR From 9.5 to 16 Million And Other Observations
The first fully blown subsidy program in the form of Cash for Clunkers is now over. Many more undoubtedly will follow, with Cash for Woodshed Plasma TV likely to appear in 3 to 6 months. As it will facilitate Made in Taiwan and Japan exports to the US, one does not anticipate any WTO trade wars. Anyway, here is what Goldman had to say about the impacts of CfC:
1. Monthly vehicle sales: 15+ million SAAR in August. Of the vehicles sold under the “cash for clunkers” program, almost 600,000 were sold in August; this translates to about 7 million at an annual rate on a not-seasonally adjusted basis. Even after accounting for the fact that August typically has about 10% higher sales volume than the average month, this could have pushed the monthly seasonally adjusted annual rate (SAAR) of sales over 15 million vehicles, perhaps over 16 million. One question is whether customers who couldn’t take advantage of the rebate kept purchasing at a similar rate in August as in prior months (about 9 ½ - 10 million SAAR).
And after August's 16 million SAAR which is a 60% boost to July numbers, who wants to guess what September's SAAR will plunge to?
2. Non-auto sales: probably not much cannibalization. The intense focus on vehicle sales amid a generally difficult consumer environment may have come at the cost of spending in other areas. Although it will be impossible to know for sure even after the data are released, we suspect that non-auto spending will be slightly lower in August than it would otherwise have been. This observation is based on a very back-of-the-envelope analysis: we look at two other months in the last decade in which heavy promotions caused the monthly SAAR to jump by more than 2 million (October 2001 and July 2005). In both months, non-auto retail spending was slightly weaker than predicted (an average of 0.3 percentage points) by a model incorporating hours worked, weather variables, gasoline prices, and several other factors. If all spending was affected similarly, the impact would be 0.3 percentage points of nonauto consumer spending, or about $2½ billion.
Alas, in both 2001 and 2005 the Consumer saving rate was nowhere near as close to where it is currently. The possibility of non-auto cannibalization this time around is substantially higher.
3. Consumer spending: a 2-point boost to annualized growth in Q3. The nominal value of cars sold under the CARS program in July and August was probably about $15 billion (this assumes an average pre-rebate price per car of almost $22,000; the mix of vehicles purchased under the program appears to cost a bit less than the US average). Netting out perhaps $1-2 billion for cannibalization of other sales per point (2) above, this represents about 0.5% of quarterly consumer spending at current levels. In that case, the boost to the sequential growth rate of real consumer spending would be about 2 percentage points at an annual rate. (The implications for real and nominal spending diverge a bit, since consumers themselves are spending less—because of the rebate—but are still getting the same cars.) Our forecast for the third quarter is for 2% annualized growth in real consumer spending, so we’re essentially assuming that nonauto spending is flat.
The administration is desperate to front load GDP improvements at all costs: is the 25 pts increase in the S&P really worth it? Also begs the question what is the impact on car prices for the above mid-range and premium segments? Are BMW and Audi starting to really sweat? Don't look now, but dare we say it, deflation?
3. Inventories: less contribution to growth in Q3, more in Q4. Insofar as the boost to vehicle sales was more rapid than expected, manufacturers may end up with less inventory than they anticipated. The rate of inventory depletion will almost certainly be less than in Q2 – so there will still be an inventory-based contribution to GDP growth from the vehicle sector – but some of this contribution seems likely to be shifted into the fourth quarter.
Toyota which was the primary beneficiary of CfC announced yesterday it is reducing global capacity by 10%. Nuff said. Next.
4. Real GDP: Help in the second half. The cash for clunkers program will boost consumption and deplete inventories in Q3, relative to what would have been the case. These have opposite implications for Q3 GDP. If the boost in sales from the program was a complete surprise to automakers, then the consumption and inventory effects would be offsetting, with no impact on GDP until automakers increased production to rebuild inventory levels. In reality, automakers knew the program was coming, and had already scheduled substantial production increases in Q3. Most of the large manufacturers announced further production increases, mostly in Q4, after the early success of the program became evident. So the GDP effect will be split between the two quarters. Overall, if we take $15 billion of incremental spending as a summary of the impact, this would be worth about 0.2% of GDP in the second half of the year. If the effect were evenly split between the two quarters, it would raise the level of GDP 0.2 percentage points in each quarter; this would imply a 0.8% percentage-point boost to annualized sequential growth in Q3 and no impact in Q4 (since the level of activity would be the same).
Today's declining inventory number was conclusive evidence that the
inventory build story, and resultant GDP boost, is still a myth. Next.
5. Consumer prices: a small discount in August. The value of the rebates in August represents approximately 18% of the vehicles’ retail price. That discount applied to about 10% of the vehicles sold in July, but should apply to around 40% of the vehicles sold in August, for a net change of -5.4% ( =(40%-10%)*-18%) in the average vehicle price. New vehicles have a weight of about 4.5% in the CPI, so the net impact on the overall level of consumer prices should theoretically be 4.5% * -5.4%, or a decrease of 24 basis points. Note that this is only a temporary effect on the price level, so there should be a full payback for the July and August effects in September, when consumers will no longer benefit from the rebates. Also note that this could be partly or fully offset even within the month if dealers chose to offer lower discounts in light of the government rebate (this seems to have been what happened in July, when new vehicle prices in the CPI posted a substantial month-on-month increase despite the rebates).
A decline in CPI is just what the doctor ordered: one hopes Bernanke can spearhea,d an inflation campaign on increasing beer prices alone.
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If these subsidy programs really work then why wouldn't we do them ad infinitum?
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else.
When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."
Cash For Refrigerators.
http://www.reuters.com/article/mnEnergy/idUS225779891520090825
Obama's bringing back one of Stalin's policies:
http://www.theonion.com/content/node/43206
Heisenberg uncertainty principle: You can't precisely determine certain pairs of variables (such as position and velocity for quarks). i.e. You can't determine true consumer buying behaviour in the presence of sales stimulus. GS's analysis is just bad science.
All you really know is that 600k subsidized cars were bought in August. You can't extend those figures into other spending...
Mos at 1955 wrote
The government cannot give to anybody anything that the government does not first take from somebody else....What one person receives without working for, another person must work for without receiving.
---
you are guilty of simplistic thinking
taken to tits conclusion one would kinda call into question, the minimum wage laws and maybe even the emancipation proclamation
survival of the fittest is best, right?...let the most powerful take all they can...and any notion of justice or regulation is just stealing freedom from the strong
right?
taxes for social security, national parks, the interstate highway system, and even the army is all just socialism and stealing from the rich
do you believe what we need in america is private enclaves, clubs, secret societies and corporatism...and especially more blackwaters?
wake up,schooling and providing basics for the masses thru a safety net and minimum standards of living benefits us all
benefits us all, you get it?
nothing exists without law, justice, government and society
if bill gates were air lifted into the wilderness with nothing but his wits he would never be able to produce a company like microsoft
stop crying that the rich have to pay most of the taxes
the rich are doing ok, i know from personal experience
Cash for Clunkers is the warm-up act for Cash For Everything Else. I think I heard somehting about Cash for Home Appliances in November (seriously), but I'm guessing today's durable goods orders ex trans are putting the kibosh on that cool idea. Down 27% from the high-water mark. That's a shit load of "down."
The anticipated Cash for Cadavers program might be arriving a bit late for T. Kennedy.
You mean the Cash for Coffins is the next idea they bring up (thx Ted for the idea). I guess you would want all the seniors to die now cause its cheaper to pay for their burial. And hopefully they left you with some sort of inheritance aside from their battered 401k accounts.
How bout a cash for not having kids subsidy?
I think that is a wonderful idea. We already subsidize shit-gened people popping one out year after year, why not make it even?
Heard they were paying people to go get Swine Flu vac shots.
How bout a cash for not having kids subsidy?
never gonna happen, need more consumers who will consume more.
Perhaps they'll start subsidizing hookers. Of course the depraved and sex-starved among us can only hope...
Can't wait for "Cash for Whores." Got mine already picked out.
and " Cash for blow " program complimented with " Cash for cheap motel rooms " program
How many new bad consumer loans will this program create?
Mos at 1955 wrote
The government cannot give to anybody anything that the government does not first take from somebody else....What one person receives without working for, another person must work for without receiving.
---
you are guilty of simplistic thinking
taken to tits conclusion one would kinda call into question, the minimum wage laws and maybe even the emancipation proclamation
survival of the fittest is best, right?...let the most powerful take all they can...and any notion of justice or regulation is just stealing freedom from the strong
right?
taxes for social security, national parks, the interstate highway system, and even the army is all just socialism and stealing from the rich
do you believe what we need in america is private enclaves, clubs, secret societies and corporatism...and especially more blackwaters?
wake up,schooling and providing basics for the masses thru a safety net and minimum standards of living benefits us all
benefits us all, you get it?
nothing exists without law, justice, government and society
if bill gates were air lifted into the wilderness with nothing but his wits he would never be able to produce a company like mocrosoft
stop crying that the rich have to pay most of the taxes
the rich are doing ok, i know from personal experience
Mos at 1955 wrote
The government cannot give to anybody anything that the government does not first take from somebody else....What one person receives without working for, another person must work for without receiving.
---
you are guilty of simplistic thinking
taken to tits conclusion one would kinda call into question, the minimum wage laws and maybe even the emancipation proclamation
survival of the fittest is best, right?...let the most powerful take all they can...and any notion of justice or regulation is just stealing freedom from the strong
right?
taxes for social security, national parks, the interstate highway system, and even the army is all just socialism and stealing from the rich
do you believe what we need in america is private enclaves, clubs, secret societies and corporatism...and especially more blackwaters?
wake up,schooling and providing basics for the masses thru a safety net and minimum standards of living benefits us all
benefits us all, you get it?
nothing exists without law, justice, government and society
if bill gates were air lifted into the wilderness with nothing but his wits he would never be able to produce a company like mocrosoft
stop crying that the rich have to pay most of the taxes
the rich are doing ok, i know from personal experience
3rd times the charm.
Data on the Cash for Clunkers Program:
80% of trade-ins were American cars.
80% of purchases were for foreign cars.
Does the GS analysis account for the fact that the cash for clunker rebates are taxable to the buyer?
“Cities still think they can get money for nothing,” he says. “The bankers are laughing.”
This story is a must-read. It’s remarkable how unapologetically criminal the banking industry became during the Bush administration and continues to this day. Their blatant criminal behaviour in the midst of a country famous for its mafia suggests they also believed themselves immune to the normal laws of little people. While frauds similar to the story below happened all across the US as well, no charges will ever be filed on home turf against the capos, and I doubt any action against them would be tolerated as too many Americans now equate crime syndicates with capitalism. So threatening the crime syndicates is threatening ‘capitalism.’ In Italy, however, I think the derivatives mafia may have messed with the wrong country. Italy’s anti-mafia tools are specifically designed to deal with ‘captured’ politicians who used to interfere on behalf of powerful crime bosses . . . something the US will need if it is ever going to be able to circumvent the crime families capture of Congress via their lobbyist foot soldiers.
Criminal probe into swaps sold to Milan by JP Morgan, UBS & Deutsche
http://maxkeiser.com/2009/08/27/crimina ... -deutsche/
As long as there is toxic garbage, the fed or treasury can buy it. Clunkers, AIG, BS, Lehman, Fannie, Freddie, treasuries, first time buyer mortgages, swaps, used toilet paper, old vacuum tubes, cadmium batteries, lead painted walls, asbestos ceiling tile, dust bunnies, squashed roaches, lawn sausage. Come one, come all to the federal dump.
"What one person receives without working for, another person must work for without receiving."
which is why the bankers shouldnt of been bailed out!