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Auto sales continue to boom

By now, even the most pessimistic of economy watchers have to admit that there has been a significant recovery in auto sales. Since hitting bottom in Feb. '09, sales of cars and light trucks have increased at an 18% annualized rate (31% in nominal terms). To be sure, the level of sales is still historically low. But what counts—always—is the change on the margin, and that change is very positive. Rising auto sales are having an impact all the way down the production chain: higher than expected sales result in lower than expected inventories, which in turn spark higher than expected orders for new cars, which then result in unexpected increases in orders for parts and materials. That has ripple effects all throughout the economy.

And it's not just rising demand that is energizing the auto industry. Rising demand is the by-product of increased confidence in the future, the return of liquidity to the financial markets, new growth in private sector jobs (which, according to the household survey, have increased by over 1.5 million so far this year), strong demand for U.S. exports, a 9% increase in industrial production, and record levels of corporate profits. It's the increase in the economy's output (supply) that has enabled the increase in auto sales (demand).

It's not surprising therefore that Ford's stock has risen almost 900% since Feb. '09, and today reached a new post-recession high. This recovery is for real.

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