Ford: Industry Sales Pace May Have Slowed on Fed Signals

[jpd80]

Ford: Industry Sales Pace May Have Slowed on Fed Signals

 

Ford: Industry Sales Pace May Have Slowed on Fed Signals

By Craig Trudell & Keith Naughton - Jun 28, 2013

Ford Motor Co. (F), the second-largest U.S. automaker, said the pace of industry sales in

its home market may have moderated after the Federal Reserve signaled it could begin

unwinding its accommodative monetary policy.

 

“The industry was really strong in the first half of the month, but maybe slowed a bit in the

last week,” Joe Hinrichs, Ford’s president of the Americas, told reporters today in Dearborn,

Michigan, near the company’s headquarters. Ford is monitoring whether concerns over rising

interest rates are denting consumer confidence, he said.

 

Auto lending has accelerated as the U.S. market rebounds to a pace of more than 15 million

sales this year, positioning the industry for its best year since 2007. The Fed’s monetary

policy has driven rates for new-car loans to record lows, supporting demand from U.S.

consumers looking to swap the oldest vehicles ever on American roads for new cars and

trucks.

 

Federal Reserve Chairman Ben Bernanke said last week that the Fed may taper the current

$85 billion monthly bond-buying program later this year and halt purchases around mid-2014

should the economy grow in line with Fed projections. Concluding the stimulus program may

take years to complete since most Fed officials said they don’t expect to begin raising the

benchmark lending rate out of its lowest-ever range of zero to 0.25 percent until 2015.

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More at the link.......

Edited June 28, 2013 by jpd80

[Noah Harbinger]

Free money has to end sometime. I've heard it claimed that low/zero interest rates have the effect of reducing the opportunity-cost of holding cash.

[BrewfanGRB]

From a technical economic standpoint, it sort has to reduce the opportunity cost. If short and medium-term bonds produce a yield that's equivalent to (or even less than) inflation over its term, then there's no cost to holding cash, when the benefit is the liquidity to rapidly redeploy that capital elsewhere when another opportunity arises.

 

That said, the Fed is in a tough spot. To an extent, the market's reaction to his statements shows the economy has become dependent on those monthly purchases--the effects of which are basically "baked in". The goal should be for the economy to eventually re-fire so it's growing fast enough where those purchases become less "noticeable". (Or put another way--when consumer wages and confidence have grown enough where reasonable increases in interest rates don't reduce their demand for goods like cars).

[fordmantpw]

I just hope the mortgage interest rates stay low for another 15-18 months until we get our new house finished, and our current one sold. A 1% interest rate makes a HUGE difference in a monthly house payment, so it can drop the price we can get for our current one, and increase what we pay for our new one. A double-whammy!

[jpd80]

The whole reason for low interest rates is to stimulate the market and increase lending activity.

Once that is being achieved, it's then a matter of tailoring interest rates to the actual needs of the economy.

 

Those low or no interest rate loans are just as good as cash incentives on vehicles, some dealers will

probably say more so in that closing a deal on a new car is much easier if the buyer see no interest

repayments but then offsets that with less cash incentive. It's smart business..

Edited June 28, 2013 by jpd80