In my last post, I covered why industry watchers should be careful when using monthly auto sales data to discern the direction of the overall economy. The basic point was that the usually cited seasonally adjusted annualized rates of sales (SAAR) overstates the underlying demand during sales periods and understates it when the deals are less obvious.
But there is another factor to consider as well.
Most sales reports feature the SAAR for overall sales. By this I mean sales to both fleets and sales at retail.
Remembering what I said earlier about the limitation in the SAAR algorithm, retail SAAR has some utility as a window into consumer confidence. But lump both retail and fleet together and what does that tell you? Not much.
Fleet sales can fluctuate wildly from month to month. This is even more the case this year.
1/ Most years, fleet sales are stronger in the first half, weaker in the second.
2/ Car companies have great discretion as to the month the sales are reported.
3/ It is not clear how many fleet sales this year have been to government fleets triggered by the government’s economic stimulus package. (At least it is not clear to me.) It is not that we haven’t tried to look at this. After all, as the stimulus money winds down, second half sales forecasts would clearly benefit from a better understanding of any first half extraordinary spending that would not be repeated in the second half. The rub is that as the money trickles down through the system, the agencies buying fleet vehicles are the agencies that usually buy anyway. Did they rotate fleet vehicles a bit earlier than normal? Hard to say.
Can we just forget about fleet sales when looking at SAAR? It is a good question. The problem is that fleet sales are very worth noting. They have a material impact of car company profitability. (Sometimes good, sometimes bad, depending on the type of fleet sale)
But if you are looking at vehicles sales for a sense of the direction of future economic activity, retail SAAR is the number to use. Just be aware of its limitations.