Question

How is auto sales data collected? What does the indicator, auto sales, tell us about the US economy? What does it mean for the overall economy when it goes up or down?

Answer 1

The bureau of economic analysis in US conducts a survey every month to asses the growth of auto sector by calculating whether auto sales has increased or decreased in that particular year. Auto sales are most important indicator of automotive industry.

Automotive industry is cyclic business which means changes in revenue and earnings of automotive industry are more likely due to the state of economy and strength of consumers. Sales in auto sector is higher when economic activity is higher and people feel confident about future economic prospect.

When auto sales goes up it means people are spending more and economy is booming and expanding which means higher economic growth on account of higher private expenditure. And when sales are low it means people are spending less and economy is contracting. When people don't feel confident about the state of the economy that they'll be able to repay the auto loan due to economic slowdown in future. And this leads to a economic slowdown.

In short, automotive industry is very important indicator of any economy, when auto sales are up the economy is booming and expanding and when auto sales are down it means economy is contracting and slowing down.