The US consumer is on a tear.
On Thursday, we learned that US auto sales in September rose to an annualized pace of 18.2 million vehicles, the fastest pace since 2005.
And this data comes after we saw consumer confidence bounce back in September while exports are starting to look like a drag on GDP growth in the third quarter.
The story here is that the strong US dollar is weighing on results for corporate America and its trading partners while acting as a tailwind for consumer spending, which accounts for about two-thirds of GDP.
In a note to clients following Thursday’s auto sales data, RBC Tom Porcelli wrote:
One of the more timely consumption metrics suggests this domestic strength theme is firmly in place. The final tally on September auto sales (at 18.17mn) is not only a fresh cycle high but the best read since July 2005, when the temporary “employee discount” promotion took sales to 20.7mn. Outside of that period you have to go all the way back to Dec 2002 to see a print this high. This outcome should get real PCE estimates for Q3 closer to our current tracking of 3.5%. The bottom line is the private domestic US economy continues to outperform in the face of global headwinds.
For the last year, one of the major themes in global economics is that the US is the best house on a bad block. And with concerns over growth in China, Europe, and emerging markets still dogging investors, attention has turned to the US consumer to pick up the slack.
And consumers are delivering.
- RBC Capital Markets