Even as interest rates rise, strong demand for new vehicles could serve as the difference between a mild and a more serve recession in 2023, according to economists at the University of Michigan.
A potential beacon of hope comes in the form of the auto sector, where sales of new light vehicles might be ready to boost growth. Both sales and the pace of production have improved recently. Rising inventory-to-sales ratios should help meet pent-up demand and could curb price inflation.
The researchers say the backlog of demand caused by supply chain shortages during the pandemic recovery could “prove to be a silver lining as the economy cools.” Couple that with the industry’s shift to electrification, which should support near-term labor demand with investments in assembly and battery production plants, the U-M forecast notes.