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FOOD, ENERGY AND CARS and DRIVER-LESS CARS

Spencer England | April 19, 2012 2:43 pm

A few weeks ago I showed energy consumption as a share of nominal personal consumption expenditures (PCE ) and though it would be interesting to follow up with food and energy as a share of PCE. From 1959 to 1999 food and energy fell from about 33% of PCE to 17.5%. This almost 50% drop in food and energy as a share of spending reflected several things. But overall it probably reflect rising standards of living as the fall allowed consumers to spend their income on other things. But note that since 1999 food and energy have been absorbing a rising share of total consumption. Something similar happened in the 1970s when the real price of food and energy also rose.

One way consumers adjust to higher energy prices or a lower standard of living is to delay purchasing a new car. This is such a strong tendency that energy and autos combined account for almost a constant share of PCE..

Looked at another way, the number of cars and light trucks on the road per household has stagnated since about 1999 .It is an interesting question if this recent flattening is a cyclical or secular development.

The number of cars and light trucks per driver has followed a similar pattern.

If this is a secular trend it is a basic reason why the auto industry industry is a mature industry with very weak growth prospect, especially if you combine these trends with a much slower growth in the number

of drivers. The bulge in the number of drivers in the 1960s-70s is the baby-boomers starting to drive. But in about another 15 years or so they will be reaching the age where they are going to have to turn in their drivers licenses and quit driving. Is this the source of demand that Google is targeting with its current experiments with driver-less cars?

3 Comments

Daniel Becker says:

April 19, 2012 at 3:57 pm

I wonder if in your second chart we are seeing the effect of auto tech meeting mpg standards and higher durability in 1985 to 1990 as the auto numbers rose? There were no standards increase for mpg and once the US fleet had move up, then it would level off.

Electronic really began to make a big dent in the mpg and thus durability along with more digital machining thus extending the life of cars easily above 100k miles.

Though, the introduction of “leasing” to the general public to move cars when sales were poor during the 1981 – 1983 recessions may also explain a lot of the rise. This current recession I watched a few news stories about how people were discovering the less costly option of purchasing especially now that the public has realized that a car will easily go over 200k miles.

Never understood the “I like a new car every three years” of leasing which meant permenate monthly payments.
Mike says:

April 21, 2012 at 1:49 pm

That first chart doesn’t make sense. Is the red line food and energy, or just food? Because I have trouble believing that in 1960 we spent 55% plus of our money on food and energy.
john says:

May 10, 2012 at 1:20 pm

Because of the economic crisis the autoindustry will be affected on this period.The fuel is expensive too.Maybe I will sell my car too because it`s to expensive to take care of it.Now it`s broken and I searched a lot for replacement exhaust manifolds warehouses at a lower price.