Business News
Car sales drop, manufacturing contracts amid credit crisis (Roundup)
Nov 3, 2008, 19:29 GMT
Washington - Major automakers on Monday reported a sharp drop in October sales in the United States, while the manufacturing sector contracted the most in 26 years as the credit crisis continued to spread to the wider US economy.
General Motors Corp, the world's largest carmaker, said US monthly sales dropped 45 per cent from the same period a year earlier, while Ford Motor Co posted a 30-per-cent decline.
Japanese giant Toyota Motor Corp reported a drop of 23 per cent, Honda Motor Co's sales fell 25 per cent and Nissan Motor Co was down 33 per cent.
It marked the second straight month of sharply lower sales as potential buyers struggled to get auto loans in a weakening economy.
Access to credit for consumers and banks has been severely restricted amid a financial and housing crisis that has left banks struggling to raise capital and wary of offering new loans.
The Institute for Supply Management's factory index dropped to 38.9 from 43.5 in September, the lowest level since September 1982. A reading of below 50 marks a contraction.
The depressing manufacturing figures could prompt another interest rate cut by the Federal Reserve and fresh impetus for a second stimulus package being considered by Congress. The US central bank slashed its benchmark federal funds rate to 1 per cent last week.
'Manufacturing is definitely in a deep recession right now,' John Lonski, chief economist of Moody's Capital Markets Group, told Bloomberg Television.
The US economy as a whole contracted by an annualized 0.3 per cent in the third quarter, according to an initial government estimate last week.
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Older Talkback
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Too much of consumers' money is going to pay interest. Government legislation, the Fed, and the banks have stripped consumers of their wealth. The economy will not recover until consumers do. Lowering the interest rate and throwing money at banks and other corporations is not going to fix the problem. It is only going to make matter worse when the resulting inflation sets in. Banks are going to have to take their lumps along with everyone else. To reduce the severity, banks need to lower interest rates on credit cards, mortgages, personal loans, and lines of credit. Congress also needs to stop fooling around with things that stimulate the economy like tax credits for renewables and they need to stop bringing cheap foreign labor into the country.
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BobinNov 3rd, 2008 - 20:33:00
In 1964, my dad bought a Ford Fairlane 500, and paid about $2000. For that era, it was a reasonably good car for the money. The Fairlane was about one-eighth of his yearly income. Today, the average vehicle is about one-half to one-third of the average annual income. At those ratios, don't expect people to be buying cars every 2 or 3 years.
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