Many pundits said higher gasoline prices would surely hurt sales of large cars and sports utility vehicles. The chart below compares the average price of unleaded gas collected by AAA Motor Club to the percent of motor vehicle sales that are light trucks. Media interviews of consumers seem to indicate that SUVs are becoming less popular because of skyrocketing gasoline costs over the past couple of years. But one would never know that by the numbers. The percentage of light truck sales relative to total sales fluctuates quite a bit month-by-month, so the chart below depicts the three-month moving average of the series. Notice that the percentage of truck sales increased right along with gasoline prices!

What can we deduce from this little exercise? First, despite the slump in the manufacturing sector and the slowdown in the economy overall, consumers remain quite willing to spend on big-ticket items such as cars and SUVs. How worried can consumers be about their jobs and financial conditions if motor vehicle sales remain at such lofty levels? Second, one would expect consumers to be sensitive to gasoline prices as they make decisions about new vehicle purchases, yet light truck sales are rising as a share of total motor vehicle sales even as gasoline pump prices surge. Perhaps the American love affair with SUVs and the need to refill gapping gas tanks will soften retail spending on other goods and services.

In any case, the strong pace of motor vehicle sales is unusual for this pace of economic activity. In the past, motor vehicle sales have posted much larger declines in times of economic downturns. A few economists have claimed that we are already in recession. It would be a strange recession indeed if motor vehicle sales continued at this pace.

Evelina M. Tainer, Chief Economist, Econoday