Basement Thesis: Auto Sales More Likely to Rise Than Fall According to BNY Mellon's Hoey

Outlook for Global Economy Depends on Severity and Duration of European Financial Stresses

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Oct 27, 2011, 08:30 ET

LONDON and NEW YORK, Oct. 27, 2011 /PRNewswire/ -- Many key cyclical sectors are still depressed and appear more likely to rise than fall, pointing to a "basement thesis" in autos, capital spending and housing according to BNY Mellon Chief Economist Richard B. Hoey in his October 2011 Economic Update.

In sharp contrast to the usual pre-recession condition, auto sales have recovered only from the "sub-basement to the basement" and Hoey believes that this vulnerability to a substantial decline is limited.

"We believe that U.S. auto sales are more likely to rise than fall," says Hoey. "A similar 'basement thesis' applies to other cyclical categories, notably capital spending. Housing is a special case, still stalled at a sub-basement level, with residential investment as a share of GDP now severely depressed."

Turning to the economy worldwide, Hoey believes that the outlook for the global economy depends crucially on the severity and duration of European financial stresses.

"We expect neither a disorderly financial meltdown nor a clean orderly resolution of these stresses," Hoey says. "Given the slow speed of European decision-making by various policymakers, we expect a semi-orderly stop-and-go process which averts the worst-case outcome but reduced European financial stresses only gradually over time."

See http://www.bnymellon.com/foresight/update-video.html for Hoey's complete October 2011 Economic Update.

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.9 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com and through Twitter@bnymellon.

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SOURCE BNY Mellon