Asian market crashes may impact U.S. August sales
As ripple effects from Asian market instability hit the U.S. markets this week, analysts are predicting a drop in what were already likely to be lukewarm August sales numbers.
The major U.S. indices fell roughly 3.5-4% across the board (NASDAQ 100: -3.78%; Dow Jones: -3.58%; S&P 500: -3.93%) yesterday, with all of those numbers reflecting a brief pre-close rally; before trading began to recover, the markets were down as much as 7%.
Even with the late correction, it was the biggest one-day drop in the markets since 2011, according to Reuters, and Asian futures were down, indicating the expectation of more losses despite early announcements of interest rate drops in China.
What does this all have to do with U.S. automotive sales? With the drop in U.S. markets comes uncertainty among buyers looking to make big purchases.
“There’s always a very strong correlation between how the stock market performs and new-vehicle sales,” Toprak Consulting Group analyst Jesse Toprak told Automotive News.
Compounding the issue, U.S. August sales were already set to take a hit just due to the calendar. While August sales for the past several years have included the Labor Day holiday weekend, that won’t be the case for 2015. The result? In a year when year-over-year sales have constantly increased, August may be the first real bad news for the market as a whole.
The Asian-market issues are certainly no surprise. What remains to be seen however is how significantly the recent crash will impact global automotive sales. Volkswagen and Toyota have both been scrambling to maintain growth despite sliding sales in Asia and South America.
China alone has already cost Volkswagen more than 70,000 sales in 2015 on a decline of less than 4%. Further economic disruptions in China could cost VW its global sales lead, not to mention profitability due to the German automaker’s significant recent investment in the developing Chinese market.