Interest Rates Will Weigh Down Auto Sector Despite Strong Consumer Sentiment [VIDEO] | Auto Finance News | Auto Finance News

Interest Rates Will Weigh Down Auto Sector Despite Strong Consumer Sentiment [VIDEO]

Comerica Bank’s Chief Economist and SVP Robert Dye expects that the U.S. economy could be headed for a “fiscal cliff” 2020. Despite a somewhat confident consumer segment, the weight of interest rates on the auto industry will soon take effect.

When it comes to consumers, “It is the best of times and the worst of times,” Dye told Auto Finance News during an exclusive interview at Auto Finance Summit 2018.

“There is a strong job market, a very high consumer confidence, building equity in homes and 401k and consumers are adding savings,” he said. “But there are key consumer sectors where I think there are some risk factors. My sense is we’re past the peak in the auto cycle.”

Macroeconomic factors will also shape how the auto industry performs.

“As we all know, the Federal Reserve is engaged in a monetary tightening cycle, which means they’re increasing interest rates gradually,” he said. “This means a 25-basis point increase of Fed funds rates every other meeting. That will push up short-term interest rates, and auto funding interest rates as well.”

The three federal interest rates increased proposed will be felt in the form of a lower number of units sold. “I’m expecting to see a bit of tail off, when we get into the 16-million units sales range,” he said. “We’re vulnerable to a steeper tail off, we’re not there yet but that’s what I’m looking for.”

Positive consumer sentiment and higher savings may not be enough to cushion the auto industry in the anticipated downturn. “Two key areas [auto and home] of consumer spending are not looking as strong as we would expect,” said Dye.

Check out the exclusive interview below, which is part of a special video series sponsored by White Clarke Group.

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0 thoughts on “Interest Rates Will Weigh Down Auto Sector Despite Strong Consumer Sentiment [VIDEO]

  1. Auto purchases are different from buying an airline seat.
    Airline seats are short term – 1 to 4 hours and several hundred dollars.
    When people purchase a new vehicle, it is financially significat to most buyers and they want to know that they can have their vehicles serviced and a reliable supply of parts, etc. for years to come.

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