Technically, by showing one decimal place maybe this doesn’t exactly qualify. Then again, I was only half serious. When Mexico’s government reported earlier this week that auto production fell by almost 100% in April, I wrote it was suggestive of the great possibly lingering difficulties being forecast for the other side of this economic dislocation. Automakers, basically, aren’t buying the “V” and more than that they very likely don’t have the cash to keep producing even at minimal levels.

One key reason why is the last two years. Rather than a strong economy, in the transportation industry it has been a serious recession already because the overall situation has been globally synchronized downturn. These are the weakest players left to dangle as governments toy still with their ridiculously inaccurate models – economy and virus.

Therefore, what I wrote about what we might learn from the Mexican auto industry:

You don’t go into complete shutdown and then come out the other side like nothing happened. And then, disgustingly, to be told to depend upon “stimulus” as the crucial element clinching the argument for how everything will end up returning to normal? What normal?

I never thought I’d see a -98.8%. But there’s a better chance of seeing it again than there is for “stimulus” working big inflationary miracles.

And here we are so soon. Now, technically, we didn’t see another -98.8% – but it was -98.3%. And not for some far-flung tangential economy, nor even one of our great trading partners. Near total shutdown swept the American auto industry, too.



According to the Federal Reserve’s latest estimates, car companies of all kinds ran their domestic plants such that the number of units rolling off the assembly lines was at an annual rate of 176 thousand last month. Compared to the annual rate of 10.53 million the previous April, which was itself a very low level, that means an almost complete shutdown of the entire domestic auto industry. Minus 98 point 3.

So what, April was a full month of lockdown?

While that’s true, the BEA at the same time says somehow American auto dealers (and fleet sellers) were able to sell enough light weight vehicles that this works out to an 8.6 million annual rate during the same lockdowns. It was half the number sold during April 2019, but why the enormous disparity between production and sales? Reminiscent of early 2009, though this difference actually dwarfs then.



No other industry was forced to go right to zero like the auto sector. Manufacturing of consumer goods, for example, getting back to the Fed’s IP estimates, managed an index (output) value of 87.9 in April. It was an enormous decline, down 16% from the prior year and the lowest aggregate output since 1993. At least it wasn’t zero.

There’s more than just COVID-19 in these numbers, especially autos where especially liquidity and cash for working capital is crucial. Inventory + lack of liquidity = going out of business fire sales. Preserve cash at all costs, even if it means shutting everything down in every manufacturing location. Temporarily, of course.

The Big “D.”

We can only hope that the auto industry is itself an outlier among what hopefully will turn out to be an overall economic outlier, quickly forgotten by the intended “V” turnaround. If not, then what we see in auto manufacturing would be merely at the forefront of what could be sweeping over more of the system in the coming months.



That’s about the best interpretation we can get from April and maybe May’s economic estimates. The declines will be substantial, historic in many places, but what do they really mean beyond the government’s interference? We won’t easily interpret them unless they are -98s or the like.

It’s the same thing with US retail sales, similarly dire figures also released today by the Census Bureau. The total April 2020 headline estimate here fell by an enormous 21% year-over-year (unadjusted). Seasonally adjusted, sales were down 16% from March when sales were already lower by more than 8% from February.



And like March, the overall retail sales total was aided substantially by Americans who apparently were still splurging at the grocery store last month. At a seasonally-adjusted amount just shy of $64 billion, that was 13% more than what was spent in the same places during April 2019.

Online retailers also did well, with everyone (supposedly) shut up and unable to venture outside to the mall non-store retail sales jumped by more than 20% year-over-year – the best monthly gain since last year’s Amazon Prime holiday surge.

In other words, outside of autos and consumer goods manufacturing, shutdowns haven’t been total. Most of these declines are related to them, of course, but there’s more going on probably in relation to job insecurity with now 36 million filing for unemployment (and the government temporarily propping up this huge number through “stimulus” that’s already in a huge hole).



I keep writing that a big reason why is because the US economy, like its global counterparts, was in rough shape just prior to the pandemic. The reason I keep writing this is because it keeps showing up in the data for the months just before March and April. The whole world went into this thing already pointing downward.

The Census Bureau snuck in its annual benchmark revisions in with this month’s release (OK, they didn’t “sneak” them into the publication, this is just when they happened to be scheduled) and consumer spending as far as retail sales was a little bit less than previously thought – particularly during the final months of 2019 (and, unsurprisingly, 2018 wasn’t nearly as “robust” as once heralded).

Not huge revisions by any stretch, but always in the same downward direction. And it matters for trying to understand how much the margins of weakness might have been before all the rest of this took place; how many businesses were already on the edge and then this huge shove over it.

A little bit weaker than we thought here, a bit less there, it adds up to distorting the prior picture of that starting condition.



So, yes, there wasn’t a repeated -98.8% so soon, but you might let me slide on -98.3%. What that ultimately means, and if means something meaningful since capital-intensive autos aren’t the only capital-intensive economic sector, just the most obvious right now, we’ll find out as the data becomes less historic over the months ahead. Will the declines still be deep if not April-bad as the world peeks its head out from shelter?

The problem, and where the auto data is most concerning now, is time. Not only does the “V” need to show up, it better do so quickly. Otherwise, the risks build exponentially. For both autos and manufacturers of consumer goods more broadly, there doesn’t seem to be a lot of patience. And this right from the start, in a likely nod to the existing weakness.

Since the Fed’s no help (Jay Powell thinks his magic words are all these businesses really need), perhaps GM and Ford can borrow some cash, some real cash from Kroger and WalMart. Or Amazon. There’s a better chance of that happening, and working, than there is the “announcement effect” is what will steady the global system enough to keep the damage minimal. I’d wager on finding another -98% auto number before that.

Scratch that, April Brazil autos were -99%.