August 3, 2022

Unit car and truck sales rose 2.6% in July to 13.3 million after having climbed 1.9% in June.   There appear to be two things going on.  First, the dramatic increase in gas prices to $5.00 per gallon has to be impacting the consumers willingness to purchase a new vehicle.  But at the same time the widely-discussed chip shortages are curtailing the manufacturers ability to produce.  Many respondents to the Institute of Supply Management’s monthly survey of manufacturing firms cite shortages of critical electronic components as their biggest challenge.  These shortages are going to last well into 2022.  It appears that car sales have flattened out at roughly their current level.

We expect GDP growth of  1.5% GDP growth in the second half of 2022.  After an anemic first half, strong consumer and business balance sheets, a very strong labor market, and a gradual easing of supply chain constraints should keep the economy climbing at a moderate pace of 1.5% or so in the second half of the year despite higher interest rates and higher inflation.

Stephen Slifer

NumberNomics

Charleston, SC