Will the U.S. auto market come back

In the Great Recession, the automotive industry has been one of the hardest hit sectors, along with the housing and financial industries. As the largest and most cyclical consumer spending sector, the automotive sector has historically been important for economic recovery after every postwar recession. Will it be the same this time? Will consumer demand for new vehicles stay depressed in a prolonged deleveraging process? In this paper, we present an analysis of the fundamental factors that determine long-term vehicle demand, together with the factors that drive its cyclical fluctuations. We believe the recovery of the auto industry is inevitable and that it will again become an important driver of the mid-term U.S. recovery. However, a quick return to the precrisis peak is unlikely, given the slow recovery of employment and housing markets and higher energy prices. © National Association for Business Economics.