Auto Show 2013

My annual trip to the New York automobile show took place recently. I have been going to this show since the 1960s, even before I learned to drive, and have only missed one or two shows in all these years. My kids sometimes even act surprised that there were cars as far back as the 60s when I first started attending. For them, this is so long ago that they imagine horsepower had to be measured in terms of real horses in those days.

My interest in the auto show is always two fold. I am a car person, even though I grew up loving mass transit (and without a family car) and am still a tremendous mass transit advocate. And second, as an economist, I know that the automobile industry here and around the globe is a barometer of the economy. Based on what I saw yesterday, the automobile industry is not only a beneficiary of the improving economy, but, given the number of attractive cars available, the industry is also a cause of further economic strengthening.

The crowd yesterday seemed more optimistic and more positive than the crowds at any recent car show. This looked to me to be a buying crowd; fewer teens just looking for something to do and more adults in their prime car buying years. This is not a conclusion based on carefully constructed research; rather this was a gut observation based on years of observation. And the cars on display were responsive to the audience. There were lots of smaller cars, with excellent designs, desirable features, and good gas mileage in addition. And Detroit was as well represented with these cars than were the usual sought after foreign car manufacturers. A beautiful very compact crossover from Buick; a stunning Corvette; a stylish compact from Dodge; a distinguished and very contemporary intermediate from Ford were joined by a new front wheel drive very stylish sedan from Mercedes, more Minis, new VWs, a small BMW crossover; and the usual well styled and designed cars from Japan as well as, in recent years, from South Korea. When I spend as much time looking at Kias as I do looking at cars from the largest American and Japanese representatives, you know the automotive landscape has changed.

The gas mileage numbers have changed as well and this is not just because there are more hybrids and electric cars. Since many cars are smaller, they are inherently more economical. Well regarded long time brands are swapping 6 cylinder engines for 4 cylinder engines. The peppiness seems to remain but the operating cost is reduced. With so many attractive options to choose from, the desire for a new car is enhanced, more cars sold and the economy is helped to move forward faster. From the dark days at the end of the last decade to the impressive results today is testimony first of all the government policy that recognized the importance of the automobile industry and took the necessary steps to keep GM and Chrysler in business. It is also testimony to the US automobile industry that the cars from Ford, GM, and Chrysler are as competitive, attractive, and sophisticated as the major foreign competition. From a major drag on the economy to a major positive force in the economy, kudos to all involved in making this transformation happen. And, to make sure we are never in this position again, keep up the good work and don’t become complacent again. Be thankful for where you are today and do everything possible to keep the momentum growing.

Autonomics

The worries began as soon as the economic news was released.  After three months of strong economic growth, the March figures just recently announced were a major disappointment.  The gain in March was a modest 120,000 jobs, half of what the gains were from December through February.  And of course as soon as the statistics were announced, both the economic doubters as well as the political opponents of the Obama administration began to question the strength of the recovery. For me, one month of bad news doesn’t represent the start of a new recession just as one month of good news doesn’t represent a vibrant recovery.  The economic situation we are in will be clearer over time.  And given how interconnected many economies are, the result may not entirely be of our doing.

I have my own economic barometer.  My hypothesis has not been tested (at least not by me) but I believe the results are accurate.  I believe that attendance at a major automobile show, as well as where the attendees congregate at the show, is a leading indicator of economic expansion.  I attended the New York auto show this year on the first day it was open to the public.  It was a beautiful day and the show was extremely well attended.  If you go back to the 2009 or 2010, the contrast was extremely noticeable.  In those days, there were according to my observation fewer couples, fewer kids and smaller exhibits.  This year the couples were plentiful, the kids were plentiful, and the cars were plentiful.  And what mattered even more to me, is that the cars being looked at were not just the dream cars that are affordable by very few but the bread and butter cars that help determine how many cars are manufactured and sold on an annual basis.

Almost every manufacturer (and especially every US manufacturer) had desirable new cars available or on the near horizon.  Seeing a new Chevrolet Malibu or a Cadillac ATS, a new Dodge Dart or Chrysler 300, or a Lincoln MKZ or a Ford Escape were  just a few of the many signs of American manufacturers responding to the need of the public.  Foreign manufacturers were equally impressive in their lineup of cars including, to make sure we have additional highly desirable choices, the South Korean manufacturers (Hyundai and Kia).  And yes, in looking for a new car for me or my spouse, we would now also consider a Hyundai or a Kia. The diversity of the lineups was also noteworthy.  No lack of sedans, SUVs, crossover vehicles, all-wheel drive vehicles, hybrid vehicles, small vehicles, larger vehicles, faster vehicles, and more economical vehicles.  The automobile industry to its credit and to the credit of our government is back as a positive key factor in our economy.

Economics, as I have indicated before, has a significant psychological component.  Automobile manufacturers producing cars that appeal to the public stimulate additional car sales.  These car sales in turn lead to higher profits and, most likely, additional investments by the industry.  This leads to more jobs and more discretionary income. And the end result as this process continues is a more robust economy.  Based on my caronomics analysis, the economy is doing better than the recent job statistics suggest.  Our government bailed out GM and Chrysler; nice to see that they (as well as Ford, etc.) are now returning the favor by moving our economy forward.