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Here’s What a Jump in Pickup Sales Says About the U.S. Economy – Money Morning

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.

Rapidly increasing sales of Ford Motor Co. (NYSE: F) pickup trucks signal an improving outlook for the U.S. economy, particularly the agriculture and construction industries.

The pickup sales growth is one of those unconventional economic indicators that can give investors a deeper insight into what’s really happening in the U.S. economy.

That’s because most pickup trucks are purchased by people working in the construction trades or agriculture.

So better pickup sales are a good indication of long-term confidence in construction activity by those working in the construction trades and, for farmers, a belief that crop prices will remain higher for another few years.

Along with Ford, GM and Chrysler also have reported growing pickup sales.

Sales of Ford’s F-Series pickups in December 2012 totaled 68,787, the best December since 2006 and the 17th consecutive year-on-year increase in monthly F-Series pickup sales. (The Ford F-150 has been the best-selling pickup in North America since 1976 and the best-selling vehicle in North America since 1981.)

Why Pickup Sales had Declined

Pickup truck sales had fallen off because the economy had been so poor since the start of the financial crisis in 2008 that tradesmen couldn’t afford to replace them even with the average age of pickups approaching 11 years.

You aren’t going to get much on a trade-in for an 11-year-old pickup that has been used by a tradesman every day. These trucks are going to be beat, no matter how well they are looked after by their owners.

And the workers buying new pickups have to believe the economy is going to be strong enough to allow them to make their loan payments every month for five or six years.

Agriculture workers also contributed to the boost in pickup sales.

Farmers are seeing rising gross incomes as a result of higher crop and livestock prices. To a large extent, this is due to last summer’s severe drought in the Midwest but drought losses have been offset largely by crop insurance.

Net farm income is thought to have declined by 3.3% largely because of higher fuel and fertilizer prices.

In rural upstate New York, where I live, agriculture is dominated by small dairy farms and hay. Last year was a great year for hay with many farmers getting three or four cuttings over the summer compared with the average of one to two cuttings during most seasons. The drought in the Midwest has increased hay demand and prices outside our local market are rising.

Hay is a bulky, low value-added crop so it usually doesn’t pay to ship it very far. But desperate farmers in drought-stricken areas have been paying up for hay and other fodder as stocks are being depleted earlier than usual this winter.

It is no coincidence that we are seeing a lot of new pickups being driven by happy hay farmers on the road this winter.

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