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ATLANTA — In his latest look at broad economic indicators
that might eventually sway lender and dealer activity, Manheim's Tom Webb used
the "R" word — recession.

The Manheim economist pointed out that U.S. retail sales
fell 0.5 percent in June, marking the third consecutive monthly decline as
federal officials issued revisions.

"The last time that happened, we were deep in recession,"
Webb acknowledged in his July Auto Industry Brief.

"In fact, three consecutive monthly declines in retail sales
has for decades been associated with an economy in, or about to enter,
recession," he added.

For dealers and auction executives who might wonder if
uncertainty and lack of confidence are playing a role in these trends, Webb
believes that neither factor is directly triggering the situation.

"It's more simply a lack of money and jobs," Webb insisted.
"Note, for example, that the personal savings rate has been below 4 percent for
four consecutive months, the first time that has happened since late 2007."

If Webb's commentary about retail spending didn't signal a
consumer pull-back, a recent JZ Analytics survey commissioned by TransUnion
showed just how negative consumers are about their current financial
situations.

The survey revealed that nearly four out of 10 Americans –
38 percent to be exact – said they are not at all financially fit and are very
unhappy with their financial situation.

Survey orchestrators also noted that 43 percent of
participants said there was something financially they would like to work on,
while only 11.8 percent said they were financially fit and happy in all areas
of their financial situation.

While consumers might still be struggling financially, Webb
also noted that the commercial side of the economic equation is uncertain, too.

"Where confidence and uncertainty are playing a role is in
the lack of job creation," Webb explained. "Unlike households, businesses are
flush with cash and they have low-cost credit readily available. But, uncertain
future prospects, both here and abroad, have made businesses abundantly
cautious."

Webb recapped that total employment grew by only 80,000 jobs
in June with the private sector doing only modestly better with a gain of
84,000 positions.

"With revisions, the three-month moving average of net job
creation has fallen to 75,000," Webb added.

Struggles in Europe

Webb began his look at how overseas activity could affect
the U.S. economy with the comment, "the pain that is Spain."

Although at least nine of the 27 European Union member
countries are now officially in recession and another four on the brink, Webb
emphasized that it is the trouble in Spain that has most "bedeviled" U.S.
financial markets of late.

"And our financial markets are not overreacting," Webb
emphasized. "Spanish bond yields are now at their highest level since that
ill-fated day when the euro was created."

The Manheim economist recapped that the Spanish 10-year note
rose above 7.4 percent and the two-year note jumped to 6.5 percent.

"This quick run-up in short-term yields is exactly what
preceded the bailouts in Greece, Ireland, and Portugal," Webb pointed out.
"Spain has gotten its bank bailout, but it needs support for its national debt
also.

"Although Spain is fundamentally a stronger economy, and in
a better competitive position internationally, you can't argue with the math –
these borrowing costs are unsustainable. And, by sending a misleading message,
these volatile bond yields can be disruptive to other countries," he continued.

"For example, with investors too fearful to invest in
Spanish bonds (despite record yields) and unwilling to accept the negative
yields now offered on German short-term notes, there has been a flocking to French
notes, which pushed those yields to record lows," Webb went on to say. "As in
the U.S., France's low borrowing costs are not based on solid fiscal
discipline, and they simply enable the country to avoid necessary fiscal
measures."

Discussion About Miles of Travel

In his question-and-answer segment, Webb addressed a query
about how demographic and behavioral changes were lowering the trend rate of
growth for vehicles' miles of travel. The individual wondered what might have
changed since vehicles' miles of travel rose significantly in May.

Webb noted that, indeed, vehicle miles of travel jumped up
2.3 percent in May, pushing the 12-month running total up 1.2 percent. However,
the Manheim economist insisted May's comparison was against a low level in
2011.

"Gas prices were rising in May of last year, and falling
this year," Webb explained. "The annual level of vehicle miles of travel
remains 3.1 percent below the peak level reached in November of 2007.

"Whether it is employment or vehicle miles of travel that
reaches its previous peak first is anyone's guess, but both clearly have a long
way to go," he added.