The auto industry has long been a cyclical business, and though this last trough was a deep one, the coming boom has economists excited. According to Bloomberg, the auto industry’s comeback contributed fully half of the 2.2 percent national economic growth in the first quarter of this year. Auto sales are on target to top 14 million vehicles this year, the best pace in four years.
Production is up at all three domestic carmakers, which has a ripple effect throughout the economy. Bloomberg cites Chad Moutray, chief economist of the National Association of Manufacturers, who estimates that every dollar spent on a new vehicle leads to an addition $2.02 in economic activity. The industry’s share of gross domestic product for the quarter was 2.8 percent, which is nearly as high as it was in 2007, before the economic crisis that devastated the industry, according to the report.
Despite the rise in fortunes for carmakers, stock prices have yet to follow suit. A key automotive index is up just 1.5 percent so far this year, but is down 31 percent in the past 12 months, according to the report. The U.S. Treasury Department recently indicated that because of lagging stock prices, it would not be divesting its share of General Motors stock anytime soon.