The New York Times has it right with this one: depressed asset values and reduced income are hitting domestic consumption hard in a trend that may be far more than just tightening our belts for the short term. - particularly when it comes to transportation. The graph (click to embiggen) shows the drastic drop in new car volumes and the median age of vehicles on the road over the last decade.
Baby boomers, the biggest group in the car market, are beginning to enter retirement, a stage of life when people typically buy fewer cars. Home values are down sharply, making consumers feel less wealthy, and also cutting off a handy source of money from home-equity loans for new cars.
Lifestyles have changed, too. As many people move back to cities from suburbs, they are swapping three-car garages for a single parking space. Public transit use is up.
Donald Grimes, an economist at the University of Michigan, is forecasting the lowest sales for the driving-age population this year since 1970.
From 1970 to 2001, there were 0.76 vehicles sold per driver in the United States. Now that figure has dropped to 0.4 vehicles per driver, and he does not see much of a rebound in coming years.
Coming just hours before the GM bankruptcy announcement, and hot on the heels of the Chrysler-Fiat agreement, this analysis is obviously worrying. What makes it worse is that we're looking at the last major domestic industry still producing tangible product for consumption. Were textiles and housewares still made in the US there might be a little more hope of producing our way out of the current mess; as it is, the best hope we may have had is falling flat because it has depended on the availability of capital - capital now denied the economy through a combination of consumer retrenchment and financial institution overcaution.