In the early 1960’s Ford Motor Company was coming out of a horrendous sales slide. Just take a look at the design of the cars Ford put out from 1958 through 1962. The Edsel, Mercury Turnpike Cruiser, Ford Galaxy were all big, heavy and geared toward an aging group. Even the econo-box Falcon did not elicit much of a reaction. To try to boost a sporty image, Henry Ford II made an attempt to purchase Ferrari. That effort was met with derision from the owner, Enzo Ferrari. While never a mass production firm, Ferrari made the best sports cars at the time, including the 1962 Ferrari 250 GT. Popular Mechanics named the 250 GT as the hottest car of all time. In 1962 a brand-new Ferrari 250 GT cost $18,000. That would be $182,000 in today’s dollars. Only 36 250 GTs were built and all still exist today. This October for the first time since 2018 a Ferrari 250 GT is coming up for auction. The asking price on this car is set at $60,000,000. The vehicle does not come with a heater, air conditioning, power steering, radio, passenger seat or back seats. I can now see why my dad bought the 1962 Falcon that he did for $1,380, however, I still would prefer he had saved a bit more and bought the Ferrari.
Retail sales in July rose by .7%. That is roughly on par with the average level in the post pandemic era, 2021 to now. When you pull out auto purchases the number rises to a full 1%. Between the new car prices and the interest rates, auto sales are dropping. We also see used car lots filling up and pricing falling this year by over 11% so far. They may have a way to go before people feel comfortable going back in the showrooms.
Manufacturing continues to be soft, posting 10 months of contracting activity. This likely will continue as retail and business inventories continue to rise. Consumers are becoming more selective in their purchases, seeking out good value on good quality items. We are seeing a frugality in the market that is indicative of a very carful consumer.
The oil market is a bit confusing right now. Two weeks ago, we saw the largest drop in crude oil inventories in 25 years. Last week we gained back 5 million of the 17-million-barrel drop. This week supplies dropped by that 5 million we gained. Essentially, we are down 17 million barrels of supply in the last month. At the same time, the drop in crude inventories does not appear to be causing a shortage in the supply of gasoline or diesel fuel. It certainly appears that the demand for refined fuels is falling as fast as crude oil supplies are. Part of this is the economic weakness in China, they have curtailed their energy purchases this year, well beneath expectations. US driving habits continue to change with fewer miles driven. Even the domestic producers are cutting back, our total oil rigs this week fell to 642, a slide that actually started in 2019 when we peaked at just under 1,100. As much as we expected gas prices to be higher, the supply is indicating we are probably going to be treading water for a while.
With consumers being pickier, the food industry is being divided into winners and losers. Foot traffic, industry-wide, has still not recovered to pre pandemic levels. As food costs have risen, all restaurants have raised their prices. Some have hiked the menu offering more than others. McDonalds continues to perform well offering value meals and app specials. Wingstop is benefiting from customers perceiving a good value. Chipotles Burrito bowls are hot items as you essentially get much more than if you take the regular burrito wrapped in a much smaller tortilla than was previously offered. However, the other menu items at Chipotle as well as Noodles & Company, Wendy’s and others who raised their prices have seen dust building up on the counters. I would anticipate fast food, as well as fast casual operations, will star to cut prices to get some traffic back.
Have a wonderful week
