Auto Sales and Weather

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Our post three weeks ago on the weather and auto sales argued that bad winter weather was responsible for the slowdown in consumer spending. It was likely to be a greater contributor than factors such as improving credit scores. We used variation across states in January temperature and showed that states where January was very cold had poor auto sales, whereas auto sales were pretty strong in areas that had normal weather.

We concluded: “When it comes to durable goods such as cars, it is likely that purchases will increase sharply when the weather improves in the states that had extremely cold winters.”

We now have an out-of-sample test of our conclusion: March estimates of new auto sales are out, and they are higher than at any other point since 2007. They also beat consensus forecasts, which suggests that analysts didn’t fully account for the weather-related boost.

From (SAAR stands for seasonally adjusted annualized rate)


Here is Bill McBride’s comment:“Severe weather clearly impacted sales in January and February, and some of the increase in March was probably a bounce back due to better weather.”We hope this example illustrates the power of using microeconomic data to answer macroeconomic questions.

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