Are Pick-Up Sales an Accurate Indicator of the Economy?
There has long been a belief in the auto industry that as pick-up truck sales go, so goes the broader economy.
After all, as business and spending picks up, the folks who drive pickups (contractors, builders, small business operators) are likely to buys a new work truck.
And for the most part, the historical evidence points to truck sales and housing starts trending up or down together.
Which makes the May truck sales so interesting. Full-size pickup sales surged 24.4%. The second time in the last three months pickup sales outpaced the rate of overall auto sales.
Adding to the growing chatter that this increase reflects an improving broader economy are the comments of AutoNation CEO Mike Jackson on Squawk Box Thursday morning. Jackson said, "When you want to know when this economy is going to turn, just watch the pickup sales because all those are small business entrepreneurs. And when they see the prospect for better business, they'll go out and finally buy a new pickup truck." Jackson added that AutoNation pickup sales were up a whopping 50% in May.
So do the May sales tell us the broader economy is ready to take-off?
Maybe. Maybe not.
Nearly everyone in the auto industry agrees that the broader economy is improving and auto sales should continue to grow at a decent, but not spectacular rate. Where they disagree is how much to read into the latest surge in pickup sales.
George Pippis, the head of sales analysis at Ford cautions against getting too excited about pickup sales. Why? Because the latest surge in trucks was primarily driven by Ford F-Series sales jumping 49%. According to Pippis, if the broader economy is improving, then all full size pickups, not just the F-Series should see substantially greater demand. But last month Chevy Silverado, Dodge Ram, and GMC Sierra sales grew at a much more modest rate of 6-12%.
So who is right? I think both Jackson and Pippis are making valid points.
Jackson is not the only auto industry veteran who is seeing more demand by small business operators and contractors. I've heard it from dealers across the country. So the demand is real. But given the depth of recession we're coming out of, there's good reason not to read too much into the last three months of pickup sales. As one executive said to me, "I want to see solid pickup sales for several months before I'll believe this rebound will last."
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