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AutoNation CEO Mike Jackson told CNBC that the slumping housing market is having a bigger impact on consumer spending than many people realize.
"I cringe a little bit every time I hear from specialists who say there's no spillover from housing on to the consumer," Jackson said. "I flatly disagree with that."
AutoNation [AN
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], the country's largest automotive retailer, posted second-quarter earnings of 38 cents a share, four cents below analyst estimates. Jackson blamed the shortfall on weaker consumer spending.
"There's no question it's a miss," he said.
The structure of auto sales has changed "dramatically", Jackson added. While first-half industry sales may be down 1%, he said "capital spending on fleets is up but the consumer has pulled back. Retail auto sales are down 9% for the first half of the year - you're talking about losing almost a million units at retail for the industry for the whole year."
In Florida and California, Jackson said, automotive retail sales are down 14%.
"Those are the big down housing markets and there's a big direct parallel between the housing market and automotive retail sales."
Jackson says the rise in gasoline prices is also hurting his business, calling it a "one-two punch", but says it's "80-percent housing and 20-percent gasoline on the mindset of the consumer."
Given what Jackson sees as a direct link between housing and consumer spending, he thinks that the economy is staying afloat because of corporate capital spending.
"The typical cycle is, at the end of the run, the consumer pulls back, capital spending continues pushing off the day of reckoning," said Jackson who feels "there are a lot of storm clouds on the horizon" and that the Fed may have to cut interest rates to prevent a recession.
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