Chart of the week
Car sales fell again in August. Only 1.08 million vehicles were sold during the month, some 30% fewer than in April. This sharp fall is linked to pressure on automotive supply chains, which is being felt on a global scale. A semiconductor shortage is forcing vehicle manufacturers to reduce production everywhere and existing stocks can no longer meet demand.
If September’s car sales match the August numbers, new car sales will contribute -1.0% to overall growth.
In macroeconomics, distinguishing between supply and demand dynamics is always important. While the level of economic activity is determined by the point at which supply meets demand, a fall in that equilibrium level has a different significance depending on whether it stems from a problem in supply or demand. A fall in demand can generate stockpiling and prove to be more long lasting, which is why support measures are sometimes implemented to boost activity. However, when supply side constraints hinder activity, as is currently the case, the slack period creates pent-up demand among all the people who would have liked to buy a car but were unable to do so. When production capacity returns to normal, this pent-up demand will come on top of regular demand. In other words, some of the economic activity gets deferred from the current quarter to a later date. When exactly the semiconductor shortage will end remains to be seen. Until then, the price pressure on vehicles may persist.
The following opinion was written on September 10, 2021 and is susceptible of changing.
Sources : Bloomberg, and calculation from Lazard Frères Gestion
As of : September 10, 2021
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