Lost in all the stories yesterday about gas-pedal problems at Toyota, the impact on their sales in January (which fell almost 50% from December), and sales gains by GM and Ford was the fact that overall domestic vehicle sales (including the big 3 and foreign transplants) plunged to an annual rate of 7.9 million vehicles in January, much worse than analyst expectations of a small decline from 8.5 million in December to 8.4 million. After rising for three consecutive months, domestic vehicle sales fell in January to their lowest level since October.
Aside from the happy 4th quarter GDP report, evidence is mounting that the economy has stalled again and may already be back-sliding into recession – the “double dip” that many economists have predicted. Jobless claims have begun rising again; job losses have resumed and now vehicle sales have slipped badly. The government’s efforts to gloss over the realities of the post-globalization economy and the root causes of the collapse are failing. The Federal Reserve is out of ammo and will halt its balance sheet expansion (currently in the form of purchases of mortgage-backed assets from the banks) in March. And patience with exploding deficits is growing thin. Things are going to get very interesting this year.