Join        Login             Stock Quote

Auto Sales Are Apparently Critical In 2nd Half Forecasts

 June 28, 2011 03:20 PM

Want to help the economy recover in the 2nd half? Buy a new car or truck.

Economists have been missing their economic forecasts by wide margins all year. Early in the year their consensus forecast for 1st quarter GDP growth was 3.5%. In the final weeks of the 1st quarter, as economic reports worsened, they frantically lowered their forecasts but were still too optimistic when the quarter came in with only 1.9% growth.

Even so, they were sure the 2nd quarter would show a quick rebound and left their forecasts for 2nd quarter growth at 3.5%.

Now, in the final weeks of the 2nd quarter, as economic reports have worsened even further, they have lowered their forecasts to an average of about 2.4% growth.

[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]

But they are still leaving their forecasts for the 2nd half unchanged at 3.5% to 3.9%.

Will they be behind the curve again?

Apparently it depends a lot on the auto industry, and whether it can rebound quickly from the production slowdowns created by the parts shortage dilemma after the Japan earthquake/tsunami disaster.

Macroeconomic Advisors says its 3rd quarter GDP forecast includes 1% of growth coming just from an improvement in auto-production (even though auto production accounts for only 2.5% of the economy).  And Morgan Stanley, which is forecasting 3rd quarter growth of 3.9%, says expected improvement in the auto sector accounts for 1.5% of its forecast, more than a third.

So, keep an eye on what the car-makers have to say for an indication of whether economists are still smoking the wrong stuff with their forecasts.

[Related -Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week]

With the current quarter forecast of growth running at just over 2%, June economic reports coming in weaker than forecasts, and the 3rd quarter beginning in just a few days, it seems the entire economy, not just the auto sector, would have to make a heck of a dramatic upturn in July for the 3rd quarter to reach the 3.5% to 3.9% growth that is being forecasted.

Short-Term Oversold Rally Still Likely.

A couple of weeks ago I noted the short-term oversold condition beneath the 50-day m.a. and predicted a rally off the oversold condition. I noted the first resistance would be at the 21-day m.a., but the 50-day would be more likely.

Last week the market was up for 4 straight days, reaching its 21-day m.a., and then was down for 3 straight days, looking like the resistance at the 21-day m.a. had stopped the rally.

But that brief rally did not alleviate the oversold condition beneath the 50-day m.a., and our short-term indicators remain on a short-term buy signal.

Next Page >>123


Comments Closed

rss feed

Latest Stories

article imageTackling China's Debt Problem: Can Debt-Equity Conversions Help?

China’s high and rising corporate debt problem and how best to address it has received much attention read on...

article imageWill Job Growth Kill The Bear-Market Signal For Stocks?

It’s all about jobs now. Actually, it’s always been about jobs. But the stakes are even higher—perhaps more read on...

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.