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Consumers jump-start sputtering economy
Weak spots strain September revival
“The strength in vehicle sales will most likely support other parts of the economy beyond the auto sector,” Mr. Thayer said.
“People are getting more comfortable and confident with the current jobs picture, especially as it relates to spending on their car,” said Scott Hall, executive vice president of Swapalease, an online auto-lease dealer.
Consumers have paid down many of their debts and are seeing enough growth in incomes that they are willing to add $150 or so to their monthly car payments and buy newer cars, he said. But consumers remain worried about their long-term job security, he said, so they are shunning loans and leases with terms lasting longer than 20 months.
Housing back on track
With the economic recovery now driven more by sales of autos and an improving housing market, it is starting to look more like a traditional expansion, economists said. Housing, in particular, was conspicuously absent in the first three years of the recovery, though it historically has led the economy out of recessions.
Because of long-lasting debt and foreclosure problems caused by the monumental market collapse in 2007, housing had been a drag on growth throughout the recovery until this year.
But now, “housing starts and home sales are on an upward path” and are being aided by the extraordinarily low interest rates engineered by the Fed, said Sung Won Sohn, an economics professor at the California State University Channel Islands.
“It is no longer a drag on the economy and could be a source of strength,” he said. “It is not possible to have a meaningful economic recovery without housing.”
The rebound in autos is also a traditional source of strength in a recovery that clearly has moved to the forefront this year, Mr. Sohn said.
Consumers eager to replace their aging cars have provided juice to the vast auto industry and its supplier industries in the Midwest — by far the largest manufacturing complex in the country — turning it into “another bright spot in an otherwise sluggish economy,” he said. Some analysts expect Detroit to hit its pre-recession pace of auto sales of more than 16 million units a year within a year or two if sales continue to surge like they did last month.
Sonecon LLC economic consultant Robert Shapiro noted that the long-awaited housing recovery has been a key source of strength for the consumer this year, as the rises in home prices in many areas boost the value of the most important asset for the middle class and raise feelings of wealth and confidence. This improvement seems to be feeding into stronger auto sales and other areas.
“The elements of a stronger expansion finally are coming together. Household debt has largely returned to normal levels and housing prices have stabilized, and both are bolstering consumer demand,” he said. “Next, we should see business investment strengthen in response to the stronger consumer demand.”
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