The CEO of America’s biggest car company thinks the future of the US economy looks bright.
The General Motors chief, Mary Barra, told investors in a letter Tuesday that “[c]onsensus is growing that the U.S. economy, the job market and auto sales will continue to be resilient.” The company’s fourth quarter earnings report beat analyst forecasts and sent its stock up 8% to $38.30 per share in mid-morning trading — the stock’s highest price in about six months.
What GM’s earnings mean for the economy
Auto sales have long been an indicator of the US economy. Cars are indisputably described as a centerpiece of American culture by journalists, financial analysts, and car-owners themselves. And consumers’ spending on cars helps signal their willingness to spend on more expensive goods. In fact, the auto industry makes up between 3 to 3.5% of US gross domestic product (GDP), and it’s a big consumer of products from the manufacturing sector, helping drive that industry’s 11.5% contribution to GDP.
While new car sales haven’t recovered to their pre-pandemic levels, they’re headed in the right direction. In 2022, when inflation began to rear its ugly head and the Fed started hiking interest rates, new car sales fell and the demand for used cars rose. The trend reversed the following year, and Americans bought nearly 16 million new cars, 12% more than 2022.
Barra said she expects “healthy industry sales” in 2024.
A soft landing in sight
Barra’s positive outlook echoes other economists and institutions. Goldman Sachs researchers said at the end of 2023 that the US is on its “final descent” toward a so-called “soft landing” — in which inflation falls without a painful rise in unemployment — and again confirmed its outlook to CNBC on Monday. The International Monetary fund said the same is true for the global economy on Tuesday, noting that the world’s financial growth will be led by the US.