EconVue Spotlight - Autos

posted by Lyric Hughes Hale on June 5, 2017 - 9:21am

The automotive industry is a useful lens to view trends in the world economy.  The auto story has it all- global competition, labor, automation, innovation, energy, commodities, and the sharing economy.  In the US, the sector has struggled. EconVue expert Michael Lewis’s comments on industry data were published Friday. Sales in the US are likely to fall to 17M vehicles this year. 

The future could be brighter. Last week I attended the annual symposium on the automotive industry hosted by the Chicago Fed in Detroit. The impact of autonomous electric vehicles (AEV) on fuel prices, labor mobility, real estate, infrastructure, and society itself is complicated and impossible to forecast.  One counterintuitive takeaway:  Baby Boomers might adopt AEV’s faster than Generation Z.  Now 25% of the US population, Gen Z (ages 5-22) will soon be one- third, surpassing Baby Boomers and Millennials.    

While global economic data including interest rates and low inflation seem to be converging, economists such as Raghuram Rajan identify a political trend in the opposite direction, divergence. Citizens who see themselves as left behind by globalization are pushing decision making to local levels, uncomfortable with rule making too far removed. Brexit of course is an example of this trend, as is the US repudiation of the Paris agreement on climate change.

On Saturday, World Environment Day, I visited the Chicago Botanic Garden.  A record crowd attended their events, and I am confident that local efforts to protect the environment have been spurred to greater action. Don’t count the US out on climate change.

Finally, congratulations to one of our original EconVue experts Richard Katz, who has taken a sabbatical to write a book on the role of start-ups in the Japanese economy, and this week was named a senior fellow at the Carnegie Council.  



Mapped: the top 263 companies racing toward autonomous cars
Jack Stewart 5/10/2017 Wired

Forget dot coms and social networks. The hotspot for research and investment in Silicon Valley right now is the future of transport. 

The country adopting electric vehicles faster than anywhere else
Matthew Campbell 5/31/2017 Bloomberg

Norway, whose economy is built on oil, has the greatest penetration of electric vehicles.

There are now 31 companies with #autonomous vehicle testing permit in #California?
Guidaautonoma 6/2/2017 Twitter

A list of companies that have been issued permits for self-driving vehicles.

Chinese automakers launch a global offensive via emerging Asia
Hiroshi Kotani, 6/1/2017 Nikkei Asian Review

To get an idea of just how dramatically Asia's auto industry is changing, one need only look at Southeast Asia and India, where Chinese newcomers are looking to make inroads even as traditional heavyweights bow out.

U. S.

Fixing America's roads & bridges: the path forward
R. Richard Geddes & Thomas J. Madison, Jr. 6/2017 Committee for Economic Development

Absent fiscal stimulus, how do needed infrastructure repairs get funded?  This week the Trump Administration is expected to announce its infrastructure plan, including accelerating the permitting process.  

Can the CFSBC activity index nowcast U.S. real GDP growth?
Thomas Walstrum 6/2017 Federal Reserve Bank of Chicago

So far so good for the Chicago Fed Survey of Business Conditions. 

Macroeconomic effects of Medicare
National Bureau of Economic Research 5/2017

What are macro effects of eliminating Medicare? It provides insurance for 52m, is 17.3% fed spending (3.6% of GDP)?

It's not just China: Here's who could benefit from Trump's exit from the Paris deal
Huileng Tan 6/1/2017 CNBC

However, it's still too early to call a new international order, said Philippe Le Corre, a fellow at The Brookings Institution. "I don't believe this is a redistribution of cards with a new international order under the banner of China and the EU," Le Corre told CNBC's "Squawk Box," adding that he didn't believe China's international relationships would see major shifts.


Interview with Larry Summers by David Wessel
Brookings May 25, 2017

Larry Summers has “doubled down” on his view that the US is stuck in a period of secular stagnation. Summers has been right, since he made that statement two years ago, that interest rates, growth, and inflation have remained low and in fact seem to be converging worldwide. 

Understanding global trends in long-run real interest rates
Kei-Mu Yi , Jing Zhang  6/2017  Federal Reserve Bank of Chicago

Low for longer.  Global convergence in growth rates, interest and inflation. 

Watch cyberwar in real-time on this live map
Jeff Desjardins 5/21/2017 Visual Capitalist

Today’s most active battlefield is not located on the ground, in the air, or on the mighty seas. It’s taking place on the Internet.

Attacks on soft targets likely get worse
Jessica Stern 5/23/2017 Boston Globe

Attacks on soft targets likely to increase says terrorism expert Jessica Stern.  She has been sadly proven right given this weekend’s events in London.

Can monetary policy solve China’s soaring leverage?
Ran Li 5/31/2017 East Asia Forum 

The effects and efficacy of monetary policy are "blurred due to SOE-related distortions”. Interest rates don’t matter if credit is obligatory and loans might never be repaid.

Rethinking the next China
Stephen Roach 5/25/2017 Project Syndicate

Unbalanced rebalancing. With profound implications, especially for Asia. Roach says that China has failed to launch consumption and is turning once again to production.

Can President Macron revive the Franco-German engine of European integration?
Tim Congdon 5/29/2017 Institute of International Monetary Research (Video)

Towards a European fiscal union. Can Macron revive the Franco-German engine of integration? Tim Congdon thinks not.

3 ways to make rich Africa work for poor Africans
Elsie S. Kanza 4/26/2017 World Economic Forum

70% of Africans access mobile technology. The CFTA allows visa-free travel in Africa, and all of this could pull many out of poverty.

Boeing’s Iran deal Puts Trump in tough spot
Jessica Holzer 5/26/2017 Foreign Policy

120,000 skilled jobs are at stake

EconVue Research

Data Round-Up: May Jobs Report All-But-Ensures June Rate Hike
Mike Lewis 

In May, vehicle sales were 16.6 mm units (seasonally-adjusted at annual rate). This was essentially the same as in March/April, and all three months were well below their year-ago analogs. Excuses for this performance – late income tax refunds, lack of usual wear-and-tear during the mild winter – are wearing thin. FMI still expects some firming in the second half. Nonetheless, it appears that, after selling a record near-17.5 mm units in both 2015 and 2016, automakers will likely move only about 17 mm new vehicles in 2017.

Chinese Advances and Setbacks in Colombia
R. Evan Ellis

As Chinese companies, backed by the resources of Chinese banks, continue to learn about and adapt to the Colombian environment, they will doubtlessly become ever more effective in competing for public projects and commercial markets, including making better use of local partners, consultants, and employees.

Suite Française  
Karim Pakravan

Macron’s first ventures on the international scene (the NATO Summit and the G-7 meeting in Taormina) strengthened his position at home and in Europe. This said, Macron will have a very short honeymoon.  The French public is famously conservative and resistant to change. 

"Mystical Millennials"
Collin Canright

"The Mystical Millennials are overly romanticized," said Vic Pascucci, managing partner at VC firm Lightbank. Panelists at Morningstar's New York FinTech Forum, agreed that FinTech services are overly focused on Millennials, with a tendency to focus on FinTech products over consumer experience.