It’s Still The Economy

More economic fallout in the news, via the NY Times: “The auto industry is getting sideswiped by the housing crisis.”

Auto lenders and banks, closing their wallets, have prevented hundreds of thousands of consumers from obtaining the financing for a car. Home equity loans, which had been used in at least one of every nine deals, when lenders were more generous, are no longer a source of easy money for many prospective buyers. And used-car prices have fallen nearly 6 percent as repossessed cars and gas-guzzling trucks and S.U.V.’s flood auction lots.

Those forces, on top of the softening economy, are putting enormous pressure on the American auto industry as it faces what may be its worst year in more than a decade. About 15 million vehicles are expected to be sold in 2008, down from 16.2 million last year, as sales reach the lowest levels since 1995, according to the marketing firm J. D. Power & Associates.

Eric Dash reports, “The impact on the broader American economy could be profound.”

Not only is the car a consumer’s biggest purchase after the home, but the auto industry remains one of nation’s most important economic engines. With less money available to bolster the industry’s growth, the businesses that support it are also facing the prospect of a sharp slowdown.

“It is a bleak picture, and it all hinges on the availability of financing,” said William Ryan, a financial analyst at Portales Partners who has followed the auto business for years. “The whole universe related to the auto industry is touched in some way — parts suppliers, manufacturers, salespeople, trucking people, the paint and metals industries. Even semiconductors.”

For some many people, credit is tight. They are using their credit cards more often to cover neccessities due to the rising gas prices. Now, “borrowers are falling behind on their car payments at a rate faster than in other recent downturns.”

And losses are considerably worse. Auto lenders sustained losses on about 3.4 percent of their loans in the first quarter, a rate about 30 percent higher than in 2002, according to data from Moody’s Economy.com. Even some of the most creditworthy borrowers are stressed.

Things are bad all the way around. I’ve been saying here for a while that small business owners like myself are reeally feeling the pain of the economic mess we’re in. With the gas prices rising, it’s causing the price of supplies for many small business owners to rise too… drastically:

Inflation has sunk its teeth into small businesses this year. The number of owners citing inflation as their No. 1 concern on the National Federation of Independent Businesses monthly economic index in April was at its highest level since 1982. One in five owners is raising prices, according to William C. Dunkelberg, the trade group’s chief economist.

“What’s happening is every time people open the back door to receive supplies, prices are higher,” Mr. Dunkelberg said. “Right now they are trying to pass it on to their customers.” In April, 35 percent of owners said they raised prices, he added.

Where and when will it all end?

on Main Street and in households across America — where rapidly rising fuel and food prices are not excluded — the picture is not so rosy. Gasoline prices are now up to about $3.80 a gallon. The cost of diesel fuel, which powers many small business vehicles, set a record yet again on Wednesday, about $4.56 a gallon, up nearly 64 percent from a year ago. And food prices rose at a 0.9 percent rate in April, the biggest one-month jump since 1990.

“The Federal Reserve in its minutes says it is counting on the recession to manage inflation,” Mr. Dunkelberg wrote in his summary. “If we are in a recession, it is not getting the job done.”

We really need a new president in the White House that understands the economy and is listening to the concerns of the voters.

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4 Responses to It’s Still The Economy

  1. Frenchdoc says:

    I guess we’re lucky to have a Republican president. After all, everybody knows they’re good with the economy, right? What with all the fiscal responsibility and letting the market work its magic!

    Oh, and of course, nobody could have anticipated that !@#$ hitting the fan in one economic sector would affect a whole bunch of other economic activities.

    Truly, we are ruled by geniuses and the market is a rational entity… and I’m Nicole freakin’ Kidman 🙄

  2. john stone says:

    Yes, we are lucky to have George Bush as President.! He has destroyed our economy, our enviroment, hurt working people and got us into this mess in Iraq and ruined our good will around the world. Bush helped the oil companies and the pharmecutical companies, while destroying the little guy.The beautiful thing about this is that the news media gave him a pass on it all. They favored him in the elections 0f 2000 and 2004, and Rush Limbaugh and Fox News(we report you decide) are still cheering him on. We can’t get rid of Bush- Cheny soon enough!

  3. Pingback: EconWatch.com

  4. Be glad for the bad economy. Be glad for the mess in Iraq. They’ll doom the Republics from top to bottom this time.

    Naturally, Supreme Court nominations, as well as any number of other truly critical issues should control election outcomes but if our country was grown up enough for that the right wing would never be able to find enough energy to keep crawling back up from the swamp and conquering the White House.

    When will enough of us start paying attention for it to really matter? The fact that we’ve plagued ourselves for forty years with the monstrosity called The War on Drugs says that creating an intelligent country with logical governance would probably best be classified as a long term goal.