TRAVERSE CITY, Mich. (Aug. 2, 2106) — General Motors Co.'s longtime chief economist has nothing but sunshine and smiles in a forecast that predicts continued low oil prices, continued growth in the U.S .economy and continued strong vehicle sales.
“Compared to anybody else, the U.S. and North America are doing very, very well,” Mustafa Mohatarem told a rapt audience Aug. 2 at the Center for Automotive Research's Management Briefing Seminars in Traverse City.
Mr. Mohatarem said the current economic recovery has been historically unusual because it's been much slower and more erratic than normal. That, he said, “leaves you with the impression that something is wrong with the economy. But you drive around…and you see every other establishment with a help wanted sign.”
“What's missing,” he continued, “is that nobody's excited about this economy.”
In terms of existing auto sales, Mr. Mohatarem said growth has come from two demographic groups: those below age 35 and those over 70.
“We're seeing that millennials are, in fact, buying cars. Our economy may not be growing strongly, but it is growing,” Mr. Mohatarem said. “This cycle is long, it's been very healthy for autos and auto suppliers, and I expect that to continue.”
Forecast hasn't changed
Mr. Mohatarem has been a regular at the seminars, and he said his forecast hasn't changed much. He still sees upside potential. Oil prices, for example, will remain low for the foreseeable future, keeping more money in consumers' pockets.
“Here we are, courtesy of fracking, we've drilled our way to much lower oil prices. I don't see anything out there that suggests that's about to change.”
Continued low oil prices and “a healthy economy has really reversed the decline [in miles traveled]. Americans like to drive, Americans are driving, and as long as it's cost effective, they'll continue to drive,” he said.
According to the GM economist, inflation — which could deteriorate economic growth — “is a non-issue” globally. Mr. Mohatarem said interest rates will remain low, as will oil prices, with both contributing to continued improvement in auto sales.
He also dismissed concern about tightening credit among auto lenders that could put a brake on auto sales. He said the balance sheet of American households is “very, very strong right now,” which should keep auto sales growing.
“Lending to autos has been so profitable, that there's probably more supply than demand right now. It's probably one of the most profitable activities for lenders right now,” Mr. Mohatarem said.
Larry Vellequette is a reporter with Automotive News, a Detroit-based sister publication of Tire Business.