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Vehicle Sales Set to Fall, but GM Looks Attractive

We expect another down year for vehicle sales, but with a new truck platform on the way we see GM as undervalued.

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David Whiston: U.S. auto sales have seen tremendous movement since 2007 with 2008 and '09 annual declines of 18% and 21% followed by seven straight years of annual increases for 2010-16 including back-to-back record years in 2015 and '16 of about 17.5 million vehicles. The winning streak ended last year with a 1.8% decline to just over 17.2 million. So now what?

We think things are still pretty good, but we are done growing for this cycle. Unemployment and consumer confidence are some of the most important macro indicators for sales that we look at on the auto team, and we don't see a reason to be concerned--yet. Through the end of last year the number of people unemployed has declined year over year every month since May 2010 except for a 0.2% rise in September 2016. Typically though, auto sales start to fall before the number of people unemployed rises, and the broader U-6 unemployment rate of 8.2% is just above where it was when it bottomed in March 2007, so things probably stay at best flat but more likely down from here; though tax cuts and Trump's infrastructure plan are wildcards to the upside.

David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.