EconoMonitor

Recession and the oil shock of 2008

Unfortunately, this seems to be unfolding according to script.

The dramatic abandonment of gas guzzlers by American consumers continues, with last month’s sales of domestically manufactured light trucks (which includes the once almighty SUV category) down 28% from June 2007.

 

 

dom_trucks_jul_08.gif

Sales of imported SUVs, which had been holding up better, plunged even more dramatically.

Sales of imported SUVs, which had been holding up better, plunged even more dramatically.  

imp_trucks_jul_08.gif

For the lighter car category, sales of domestics fell 13%,

For the lighter car category, sales of domestics fell 13%,  

dom_cars_jul_08.gif

while imported cars, which tend to get better mileage, eked out a 4% gain:

while imported cars, which tend to get better mileage, eked out a 4% gain:  

imp_cars_jul_08.gif

The shift is a necessary change in the long run, but in the short run will definitely put additional strains on the U.S. economy, as it’s precisely this kind of disruption in domestic spending that appears to be responsible for the contribution that historical oil price shocks have made to previous U.S. economic recessions. FT conveys some of the gloom:

The shift is a necessary change in the long run, but in the short run will definitely put additional strains on the U.S. economy, as it’s precisely that appears to be responsible for the contribution that historical oil price shocks have made to previous U.S. economic recessions. conveys some of the gloom:

The US car market is heading for its worst year in more than a decade as Americans turn their backs on large, gas-guzzling vehicles, according to June sales data due out today.

The figures come as the big US carmakers scramble to adapt to the dramatic shift in demand to more fuel-efficient cars and crossover vehicles. Chrysler yesterday said it would close a US minivan assembly plant and cut one of two shifts at a pick-up truck site. Chrysler’s move will result in 2,400 job losses at the plants, both in St Louis.

There are even dark murmurs that GM, once the biggest company in America, could conceivably be forced into bankruptcy.

Is there relief in sight from the continuing rise in oil prices? I noticed this cheerful bit from WSJ Real Time Economics:

“Overshadowing all the economic data is growing speculation that Israel is gearing up to destroy Iran’s uranium enrichment plants,” said Bernard Baumohl of the Economic Outlook Group. “We assess the probability of such a military strike to be 85%, and that it will likely occur between September and November.”

Maybe they’re just trying to scare us.

Maybe they’re succeeding.


Originally published at Econbrowser and reproduced here with the author’s permission.

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Richard has published papers on wages policy, the taxation of financial arrangements and macroeconomic issues in Pacific island countries. Views expressed in these articles are his own and may not be shared by his employing agency. He is the author of How to Solve the European Economic Crisis: Challenging orthodoxy and creating new policy paradigms