If it is possible, the already deep US recession seems to be getting more intense.
Sales of existing US homes fell to a new low in January, reversing a small rise in the previous month, but the most damaging figure was an even bigger fall in American car sales in February.
They fell 41% after a 37% fall in January. That ammouns to an annual rate of 9.1 million cars and light trucks, according to industry analysts at AutoData and there’s even more pressure ahead with General Motors and Ford slashing second quarter production forecasts.
Worries about car companies, banks, housing and insurers saw the US stockmarket fall to its lowest level since 1996 overnight before rising to end at 12-year lows.
The small rise in sales of existing homes in December was being touted as a glimmer of hope that the core problem in the US slump, the black hole in housing, was steadying.
No more. In fact it is worse shape than thought and not even falling prices and a rising level of distressed sales can tempt buyers. Sales are happening, but they are scattered and hesitant.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in January, dropped 7.7% to 80.4, the lowest since the Association started tracking the series in 2001. The index was at 87.1 in December.
Last week, the real estate group said existing home sales fell 5.3% in January, while government figures showed new home sales slumping to record lows, prices dropping and new house starts also at new lows.
The housing slump is dragging down the rest of the economy, from banks and financial services, to building materials, whitegoods, furniture, and cars. With unemployment surging and credit still hard to get, its no wonder car sales remain weak.
Led by a 53% drop at General Motors, the car industry is now being shaken to its core. It was the 15th consecutive monthly drop in auto sales and this comes as a deepening recession in the United States and slowing global markets push major automakers to ratchet back production and ramp up discounts.
GM has cut its quarterly production plan by 34%, Ford by 38%.
So it was no wonder that Toyota shocked the industry overnight with the news that it had approached the Japanese government for financial help via its financial arm. It wants $US2 billion and will get it from a Japanese Government owned industry bank as part of a new program revealed by the Government overnight.
The JIBC bank will be given $US5 billion from Japan’s foreign reserves to lend to local companies suffering cashflow or liquidity problems ahead of the end of the country’s financial year on March 31.
Toyota’s financial services arm, which finances car sales in Japan, the US and countries like Australia, has run out of money and has found it harder to refinance. It is faced with a growing level of car loan and lease defaults in the US (as are all car company finance subsidiaries) and in Japan.
It puts the mighty Toyota on the same footing as the mendicant US car companies, General Motors and Chrysler which are facing bankruptcy if they don’t get more money from Washington.
Meanwhile, Volkswagen, Europe’s largest carmaker, said on the weekend that it will cut all 16,500 temporary jobs globally. It shut five factories in Germany last week. No wonder after the cut in its forecast for 2009 global sales. France gave PSA Peugeot Citroen and Renault SA (the other half of Nissan) a total of 6 billion euros in loans last month, on the proviso they don’t close plants and bring production home from plants elsewhere in Europe. In the UK, carmakers are seeking support for their finance units from the Bank of England.