luxury car, economic indicator

Is The Economy About To Boom? This Indicator Says So

The economy is cooked.

That’s the feeling you get from the ranting rhetoric of politicians and negatively spun newspaper headlines.

But while there may be a few less than inspiring figures floating around – think unemployment (6 per cent), economic growth (2.3 per cent) and inflation (1.3 per cent) – we’re far from a basket case.

Rather than getting down about these bland economic measures, let’s take a look at the thing people buy when they’re feeling flushest; flash cars.

Commsec’s just released the latest reading from their Luxury Vehicle index, which tracks the sales of 16 luxury car brands in Australia, from Audi and Aston Martin, through to Mercedes and McLaren.

And going by the results, the economy might be in better shape than we’re being told.

In the year to May 2015, a record 86,568 luxury vehicles were sold Down Under. That’s 17 per cent more than the previous year and makes up a record 9.7 per cent of total passenger car and SUV sales.

So one in every ten cars sold over the last year was either an Audi, Aston Martin, BMW, Bentley, Ferrari, Jaguar, Lamborghini, Lexus, Lotus, Maserati, Maybach, Mercedes-Benz, Morgan, McLaren, Porsche or Rolls Royce.

Quite an impressive width of wallet opening going on there.

And this is actually a pretty handy indicator as to where the economy is headed next. Car sales are what’s called a ‘leading indicator’, meaning they tend to fall before an economy hits the skids and rise before an economy recovers.

People spend money on new cars when they think their financial prospects are rosy, and stuff their wallets away when they’re worried about what’s to come.

While it’s by no means definitive, it’s certainly one sign that we’re about to leave those downbeat headlines in the dust.