Automobile purchases in the fourth quarter lost momentum due to Sandy

Article by Christian Andrei, on November 16, 2012

Because of superstorm Sandy, automobile purchases in the fourth quarter lost momentum. So for the first time in three months, the retail sales in the U.S. dropped in October. In addition, wholesale prices declined in October for the first time since May, giving the Federal Reserve some leeway to retain its ultra-easy monetary policy stance.

The Commerce Department said that retail sales fell by 0.3% after an increase in September of 1.3%. Gus Faucher, a senior economist at PNC Financial Services Group in Pittsburgh, said that economists predicted sales to drop by 0.2% but that a sales gain is expected for November. The sales decline is being attributed partly as a payback for having experienced two consecutive months of solid gains.

It’s also possible that consumers are hesitating as consumers face the prospect of higher taxes in 2013. Even when vehicles are excluded, the retail sales were flat last October. If Congress fails to act to ward off the automatic tax hikes and government spending cuts, they will drain off around $600 billion from the economy in 2013. Business confidence is believed to suffer due to this so-called fiscal cliff.

Matthew Shay, president of the National Retail Federation, said that it’s “imperative” that policymakers find a solution to the impending fiscal cliff now so that consumers acquire some confidence as the holiday shopping season approaches. Automakers point the accusing finger at Superstorm Sandy for the sudden plunge in sales. Automakers said that fewer people and fewer transactions entered East Coast dealerships due to the storm. The impact appeared worse since typically, sales would build up late in the month.

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