*** Happy, Healthy New Year ***
Discounts on the Dealership Lot Lift Car Sales Some automakers have seen inventory jump to prepandemic levels, prompting them to spend more on promotions
(…) Car buyers received about $3,400 in discounts and other incentives on average during the busy December shopping season, up more than 25% from a year earlier, according to research firm J.D. Power. The offers have included low- and zero-percent interest rates, cash-back offers and cheap leases, especially on electric vehicles. (…)
Industrywide U.S. sales rose by about 7% in December, according to a J.D. Power forecast. Most automakers are scheduled to report their latest sales tallies Friday. (…)
For the year, U.S. vehicle sales are expected to rise 3%, to about 16 million vehicles sold, decelerating from 12% growth in 2023. (…)
The U.S. car market hasn’t returned to the 17-million-vehicle annual sales mark that held steady for several years before the pandemic disruptions. Analysts and car executives say that is partly because many shoppers remain priced out of the market, despite the recent return of promotions and discounts.
Higher interest rates have kept monthly payments elevated relative to prepandemic levels. Also, a dwindling number of smaller, cheaper cars for entry-level buyers has curbed overall sales.
Average discounts are currently about 8% of the sticker price, according to research firm Cox Automotive, up sharply from recent years but still below the 10% industry prepandemic norm. (…)
US credit card defaults jump to highest level since 2010 Consumers are ‘tapped out’ after years of high inflation and as pandemic-era savings have evaporated
That’s the front page of today’s FT, informing us that “defaults on US credit card loans have hit the highest level since the wake of the 2008 financial crisis, in a sign that lower-income consumers’ financial health is waning after years of high inflation.”
Federal Reserve data through Q3’24 show that overall delinquencies are still below pre-GFC levels except for smaller banks which mainly lure lower income consumers.
KKR shows that upticks in credit/auto defaults this cycle have been driven by younger borrowers, who saw borrowing increase at a disproportionate rate during the pandemic.
Total outstanding principal balances for consumer debt categories, including credit cards and auto loans, are running quite close to subdued pre-pandemic levels relative to disposable income.
Younger and lower-income earners are more significantly impacted by life essential expenditures (food, energy, shelter) but the squeeze has been easing a little recently. A recent Bloomberg survey revealed that approximately 45% of people ages 18 to 29 lived at home, an 80-year high.
Trump’s Tariff Threats Are Setting Off a Global Supply Chain ‘Freakout’ US and European companies are frontloading orders and weighing price hikes while Chinese factories hunt for buyers elsewhere
(…) Across the world, businesses aren’t waiting until US Inauguration Day on Jan. 20 to see which countries, products or tariff rates are announced in Trump’s widely telegraphed trade wars. The mere threat of his universal tariffs is sparking a scramble that’s leaving the global trading system prone to bottlenecks, saddled with higher costs and vulnerable to disruptions should an economic shock come along.
“We’re still in the freakout period,” said Robert Krieger, president of Los Angeles-based customs brokerage and logistics advisory firm Krieger Worldwide. “There’s about to be a king tide in the supply chain.” (…)
To get ahead of the game, some firms are frontloading orders. Others are seeking new suppliers or, if that’s not possible, renegotiating terms with existing ones. A common theme: The renewed stress comes with higher costs, in the form of bigger inventories, costlier expedited shipping, or taking a chance on untested partners. Profits will suffer and expenses will be reduced elsewhere, they said. Ultimately consumers will foot the bill. (…)
As shown by Trump’s late November threat to impose additional 10% tariffs on goods from China and 25% tariffs on all products from Mexico and Canada, both allies and adversaries are in his sights this time around. (…)
China’s ports saw double-digit growth in container throughput in the two weeks around the election and that rose further to an almost 30% gain in the second week of December. International air freight flights have increased by at least a third each week since mid-October and economists expect that’ll continue as customers rush to frontload orders.
Across the Pacific, the busiest container gateway in the US, made up of the twin ports of Los Angeles and Long Beach, is seeing a surge of inbound shipments — not unlike the wave that accompanied Trump’s first tariff volleys at China. Both ports smashed pandemic-era records in the third quarter and volumes are expected to stay elevated into next year. (…)
Jimmy Carter’s great acts: Fighting inflation by deregulation and appointing Paul Volcker
(…) In late July, 1979, Mr. Carter nominated Paul Volcker, then the hawkish president of the Federal Reserve Bank of New York, to head the central bank. While sitting on the Federal Open Market Committee, Mr. Volcker had made it clear he was in favour of more aggressive interest rate increases.
He took action in fighting inflation with increases that past Fed chairs had been too afraid to introduce, eventually raising interest rates to a peak of 21.5 per cent in 1981. Despite contributing to a significant labour market pullback that included unemployment above 10 per cent, the hikes pushed inflation, which had peaked at 14.8 per cent in 1980, to fall below 3 per cent by 1983. The episode is still cited by economists and textbooks as one of the greatest empirical examples of how raising interest rates can reduce inflation by lowering aggregate demand.
In 1983, president Ronald Reagan reappointed Mr. Volcker to a second term, beginning a long tradition of reappointing Fed chairs (even across party lines) that would last 35 years and further enshrine central bank independence. President Carter’s initial decision had important long-term consequences. (…)
Mr. Carter also played a substantial role in the deregulation of many industries in the United States in the late 20th century. In 1978, he signed the Airline Deregulation Act into law, which removed federal government control over the industry, paving the way for low-cost carriers such as Southwest Airlines.
Later that same year, he also signed into law the Energy Act, legislation that would deregulate oil and gas prices and later increase the supply of energy, lowering prices further. It also ended a period in which natural gas was blocked from entering interstate markets from producing states.
Deregulating many other industries would follow, even after the Carter administration. This practice has its critics, who say it erodes the rights of workers, but it has unquestionably resulted in further reducing prices and thus improving consumer welfare, especially for those below the median income, as inflation is historically higher for the poor.
While Mr. Reagan often gets the credit for deregulation and fighting inflation – he was in office during most of Mr. Volcker’s term at the Fed – some of the seeds of the Reagan Revolution were planted by a kind peanut farmer from Georgia named Jimmy Carter.
1 thought on “YOUR DAILY EDGE: 30 December 2024”
Denis, Thank you for your efforts and great work!
If Mr. Carter was still alive, he would be pleased that you reminded us of his efforts to combat inflation during those critical years for the population, that many of us might have forgotten…
Happy and healthy New Year !
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