I keep hearing all these great forecasts for next year and beyond - continued good times for North America, with U.S. sales remaining well above 16 million; only a slight easing off in Europe; and strong gains in Southeast Asia and in South America, although not to precorrection levels.
All in all, if you believe the projections, this bull still has a good set of legs. Well, I don't buy in. Some dark storm clouds are rising out there, especially for North America.
This year's phenomenal market in North America has been driven by rising stock and real-estate prices, fueled by low interest rates. This has been supported by flat prices for cars and trucks.
But that heady growth is in danger of being slowed, if not pushed off the tracks entirely, by two factors: rising interest rates and rising energy prices. This slowdown in the huge North American economy will have worldwide ramifications.
Everyone knows the U.S. Federal Reserve has hiked key lending rates by 50 basis points, or half a percentage point, this year in a bid to keep the economy from overheating. That's just a nibble, but Fed Chairman Alan Greenspan has made it clear that his bias is toward still higher rates in the months ahead.
Rising interest rates cut into new-vehicle sales directly, by disqualifying some number of would-be buyers on creditworthiness grounds and, indirectly, by eroding the value of assets such as stocks, bonds and property.
One tends to think twice about buying a $35,000 sport-utility when the cost of financing a new home has just gone up by several hundred dollars a month. Or when the value of the stocks in a retirement fund has just tumbled by a few thousand dollars.
In fact, we already are seeing some early signs of sales resistance in the American market. Despite record sales volumes, automakers increasingly are having to buy sales with cash and interest-rate incentives, including on light trucks.
Rising interest rates wouldn't be such a potentially major problem in the short-term were it not for this fact: Americans, essentially, don't have any savings anymore except for what they have invested in the stock market or property.
Worse, they have borrowed heavily to buy those 'savings.' That's right - according to Federal Reserve Board data, net U.S. private-sector savings (which are savings minus investment) have tumbled into a record deficit of 5 percent of gross domestic product from a surplus of about 4 percent in the early '90s.
Another scary sign: Total household debt, again according to the Fed, has risen to a record 102 percent of the nation's total personal disposable income, up from 85 percent in 1992, as total private-sector debt has expanded to a record 130 percent of GDP.
Simply put, that means Americans are borrowing heavily not only to sustain consumption but also to purchase their 'savings.' In the end, there appears to be only one way out: a slowdown of domestic demand that pricks the stock-market bubble and forces Americans to begin saving out of income rather than through investment debt. A correction caused by higher interest rates.
This correction could wreak short-term havoc in the U.S. economy. History shows that an asset-price bubble is even more dangerous to an economy than rising consumer prices because, when the bubble bursts, the fallout is more concentrated.
Cases in point: the United States in 1929, Japan in 1989, Southeast Asia and Korea in 1997-98.
All other things being equal, then, the upward trend in interest rates spells a cooldown, and possibly a deep chill, beginning in 2000.
That's without even factoring in the other storm cloud out there: oil prices.
Rising energy prices affect auto sales at least two ways. At the margin, they can alter individual purchase decisions: to buy or not, or to substitute one model or engine for another. So, depending on the extent of any rise in pump prices over the weeks and months ahead, sales of light trucks could be directly affected.
More fundamentally, rising energy prices can alter an entire market by changing the underlying economy. That's the real danger of what's been taking place this year.
If you haven't been watching, crude prices have more than doubled since January. Brent crude, the European price benchmark, has risen to more than $22 a barrel from $10 at the beginning of the year. It's now trading at its highest price in more than 2 1/2 years. In the same period, New York-traded light has soared to about $23 from $13.
Energy prices cannot double without economic consequence. In fact, what is taking place here is a rather large oil shock that already is starting to work its way into the economy and companies' costs. Although pump prices have not risen all that sharply because of huge inventories, those stocks of crude are steadily declining.
Producer prices already have begun edging up. As the effects of these are passed on through the economy, changes in output and employment will inevitably follow.
Andrew Oswald, a professor of economics at Warwick University in Coventry, England, makes the strong argument on Page 34 of this issue that oil prices and unemployment have moved in lockstep, one step removed, since World War II.
Oswald warns that the strong rise in oil prices this year will begin slowing global economic growth by the second quarter of 2000. This assumes no increase in output of crude, of course.
'By next year, normal economic mechanisms will have begun to reduce output and employment. The fourth oil shock since the end of the war will have begun,' he writes.
What he's saying to an auto industry audience, of course, is that people without jobs - or people afraid of being without a job - do not tend to buy cars and trucks.