DETROIT — Light vehicle sales are expected to decrease over the next couple of years as inflation increases and the unemployment rate continues to drop, according to the recent analysis of the Federal Reserve Bank of Chicago.
The Chicago Fed held its 24th annual Automotive Outlook Symposium (AOS), June 1–2, at its Detroit branch where more than 60 economists and analysts from business, academia, and government gathered.
According to the participants, the nation's economic growth is forecast to be near its long-term average this year and to strengthen somewhat in 2018. Inflation is expected to increase in 2017 and to hold steady in 2018. The unemployment rate is anticipated to dip to 4.4 percent by the end of 2017 and to remain at that rate through 2018.
Meanwhile, light vehicle sales are predicted to decrease from a record 17.5 million units in 2016 to 17.1 million units in 2017 and then to 16.9 million units in 2018.
State of the economy
During the 31 quarters following the end of the Great Recession in mid-2009, the annualized rate of real gross domestic product (GDP) growth was 2.1 percent in what is considered the long-term rate of growth for the U.S. economy, according to the Chicago Fed. This countered a typical pace of economic recovery/expansion that is "quite sharp" following a deep recession, the analysts said.
While the economy's expansion has lasted nearly eight years, signs of slack still remain in the economy. The unemployment rate moved down to 4.3 percent in May, below prominent estimates of the natural rate of unemployment (i.e., the rate that would prevail in an economy making full use of its productive resources), according to the report.
However, the labor force participation rate has fallen over the past several years somewhat below what demographic changes of an aging population can explain, the report said. The percentage of people who are working at part-time jobs but desire full-time employment is still above what it has historically averaged and the pool of unemployed workers who have been out of work for more than six months remains at levels higher than those seen since the Great Depression, according to the report.