Reuters

How is this possible, given the muted gains consumers have seen in their incomes?

Anyone who keeps an eye on the U.S. economy knows that the automotive business is going like gangbusters right now. In September U.S. auto sales jumped to an annualized rate of 16.1 million, the best since December 2007.

How is this possible, given the relatively muted gains that U.S. consumers have seen in their incomes?

Credit.

Take a look at this chart from Deutsche Bank, which shows the breakdown of issuance this year of different types of asset-backed securities (meaning bundled loans that lenders sell off to investors in the secondary market).

 

Issuance of automotive-related securities has surged as investors have sought higher yielding investments. And that means that cash is flowing to consumers—and dealers who often finance their inventory with so-called floor-plan ABS—allowing them to take advantage of the historically cheap interest rates that the Fed has engineered.

Oh, and for those who worry about the chances of a repeat of the debt problems the U.S. has faced in recent years, it’s worth pointing out that a healthy chunk of U.S. auto asset-backed securities qualify as "subprime." And losses have been rising.


This post originally appeared on Quartz, an Atlantic partner site.

About the Author

Most Popular

  1. Smoke from the fires hangs over Brazil.
    Environment

    Why the Amazon Is on Fire

    The rash of wildfires now consuming the Amazon rainforest can be blamed on a host of human factors, from climate change to deforestation to Brazilian politics.

  2. a map of London Uber driver James Farrar's trip data.
    Transportation

    For Ride-Hailing Drivers, Data Is Power

    Uber drivers in Europe and the U.S. are fighting for access to their personal data. Whoever wins the lawsuit could get to reframe the terms of the gig economy.

  3. Fishing boats, with high rises on the banks and a mosque in the distance.
    Environment

    Will Sea-Level Rise Claim Egypt’s Second-Largest City?

    Al-Max village in Alexandria was ruined by floods in 2015. Yet, despite climate change’s growing threat to the city, critics say it has scarcely been addressed.

  4. An aerial photo of downtown Miami.
    Life

    The Fastest-Growing U.S. Cities Aren’t What You Think

    Looking at the population and job growth of large cities proper, rather than their metro areas, uncovers some surprises.

  5. Graduates react near the end of commencement exercises at Liberty University in Lynchburg, Virginia, U.S.
    Life

    Where Do College Grads Live? The Top and Bottom U.S. Cities

    Even though superstar hubs top the list of the most educated cities, other cities are growing their share at a much faster rate.

×