European Economic Recovery? Car Sales Plunges to Record Low

We have been told that the Eurozone will be one major force in alleviating the plight of Asia and emerging markets. Unfortunately, it seems that Eurozone will have to fix their problems first before assisting anyone.

Despite positive surveys and all that, what people say and people actually do have been different. In the Eurozone, cars sales fell to the “lowest on record” last August. 

This compounds on the significant decline in July’s Industrial output which has been oceans away from consensus expectations

From Bloomberg: (bold mine)

European car sales fell in August, bringing deliveries this year to the lowest since records began in 1990, as record joblessness in the euro region hurt deliveries at Volkswagen AG (VOW), PSA Peugeot Citroen (UG) and Fiat SpA. (F)

Registrations dropped 4.9 percent to 686,957 vehicles from 722,458 cars a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Eight-month sales declined 5.2 percent to 8.14 million autos.

The economy of the 17 countries using the euro emerged from a record six-quarter recession in the three months through June. Aftereffects such as a jobless rate in the area that held at 12.1 percent in July led industry leaders at the International Motor Show in Frankfurt a week ago, including Peugeot Chief Executive Officer Philippe Varin, to stick to predictions of a sixth consecutive annual car-market contraction in 2013.

"Record low" car sales appear to be undermining the supposed re-emergence from “a record six-quarter recession”.

And to think that “record recession” means soaring stock markets where the Stoxx 50 has been in the proximity of “record highs”. Economic growth drives the stock market? Duh.

Rising stocks provide mainstream media the delusion of a perpetual “recovery” that has gone amiss as signified by “record recession”. 

The reality has been that the Draghi Put (“do whatever it takes” OMT etc…) or guarantees on the markets, has been shifting resources from the main street to Europe’s Wall Street. So Europe's Wall Street feasts on the subsidies provided by the ECB. The real economy then goes only for the morsels.

Yet recent gains in car sales have been misinterpreted by the mainstream and the officialdom as sustainable. 

The European car market rose 4.9 percent in July to 1.02 million vehicles. The gain was the second this year, following a 1.7 percent increase in April that marked the first growth in European car sales in 19 months. The trade group releases July and August sales figures simultaneously each September.

One can call this a “head fake” or in chart lingo a “dead cat’s bounce”.

The car recession has not only been deep but has been widespread.

Four of Europe’s five biggest automotive markets shrank last month. Deliveries in top-ranked Germany dropped 5.5 percent to 214,044 vehicles. That compared with a 2.1 percent increase in July. The U.K. market, the region’s second biggest, expanded 11 percent to 65,937 cars in August.

Don’t worry be happy. The consensus will keep on piling onto the stock markets which it should drive to stratospheric highs, since all other alternatives (bonds, commodities and the real economy) have been down. 

As ex-Citigroup chief executive Charles O. Prince haughtily expressed during the 2007 mania:

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.

Despite signs of the music stopping as manifested by rising global bond yields, let’s keep dancing.