As December Car Sales Announced, Edmunds.com Points Out Unreliability of SAAR Metric
SANTA MONICA, Calif.--The last ten days of December were terrific for auto sales, but it is premature to say that the economy has turned around, according to Edmunds.com, an online resource for automotive information.
“If early 2010 SAAR numbers are low relative to the end of 2009, SAAR may cause unnecessary concerns that the economy is not recovering as quickly as expected”
The Seasonally Adjusted Annual Rate, or SAAR, has been used for decades to measure economic trends, and it is likely that December’s automotive SAAR will be celebrated. However, Edmunds.com has found that SAAR is an unreliable metric during periods of economic recession. Why? Recession-era buyer psychology shifts behavior in a way that reduces the accuracy of the US Bureau of Economic Analysis’ established seasonal adjustments upon which SAAR is based.
“A larger portion of the population could be classified as “bargain-hunters” during recessions, and so seasonal discounts draw far more attention than are predicted by the pre-established seasonal adjustments,” asserted Edmunds.com CEO Jeremy Anwyl. “One could argue that in general, during a recession SAAR overstates automotive demand in summertime and during the December holiday season, and understates it in most of the rest of the year.“
Car-shoppers have been trained to count on holiday shopping and year-end deals. Many bargain-hunting car-shoppers wait for the deals to be announced, and during a recession this triggers a lower SAAR in the autumn. This year, most automakers introduced holiday deals midway through November to extend the year-end shopping season. Consumers responded, boosting SAAR in November and December. As a result, SAAR may be deflated in the early part of 2010, since the great holiday deals likely pulled in bargain-hunting shoppers from the future.
“If early 2010 SAAR numbers are low relative to the end of 2009, SAAR may cause unnecessary concerns that the economy is not recovering as quickly as expected,” warned Anwyl. “However, the next seasonal discount period – the summer – is sure to generate a significant boost in SAAR that will make everyone feel better again.”
Edmunds.com’s analysts researched U.S. automotive SAAR back to 1967 and found that in most years, SAAR was relatively stable, typically within five percent of actual annual sales volume. However, in times when the economy was rocked – such as 1981, 2001 and 2009 – the monthly variation from actual average sales volume varied wildly. In those years, SAAR averaged a difference of nearly ten percent from actual annual sales volume. During the current recession, monthly SAAR is averaging a difference of over 14 percent from actual annual sales volume. The largest variation on record is 37.8 percent, which occurred in August 2009 when Cash for Clunkers was in full force.
Edmunds.com analysts expect that 11.5 million cars and light trucks will be sold in 2010.