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Does GM's Decline Signal Problems for the Economy?

Tickers in this article: GM
Detroit (TheStreet) -- If auto sales are an important economic indicator, then the recent performance of the largest U.S. automaker ought to raise a few concerns.

General Motors reported weak sales in December and January. It missed fourth-quarter estimates, prompting some analysts to reduce future earnings estimates. Its inventories have increased and it is offering high incentives to truck buyers this month. None are good signs.

GM shares closed Monday at $34.90, down $1.21. Year to date, GM shares are down 14.6%, while Ford shares are down 4% and the S&P 500 is down 2.6%.

The reason for Monday's decline was the widespread reporting about discounts of up to $7,000 off list price for Chevrolet Silverado and GM Sierra as part of a Presidents Day promotion. The discounting added to concerns over GM's disappointing fourth-quarter earnings, reported Thursday, which called into question the company's future earnings outlook.

In a recent report, Deutsche Bank analyst Rod Lache wrote that the fourth-quarter earnings call made him "incrementally more cautious," although he retains a buy recommendation on GM.

As for January sales, GM reported a 12% decline while overall U.S. light-vehicle sales fell 3%.

Weaker auto sales are not encouraging, particularly given two consecutive weak job reports, slowdowns in emerging economies including China and, of course, the stock market's poor year-to-date performance.

Auto sales, most importantly retail auto sales, reflect decisions on what is commonly the second biggest consumer purchase after a home, and they are reported monthly, typically the day after the month ends, providing up-to-date economic snapshots.

In January, when U.S. auto sales came in lower than expected, the decline was universally attributed to bad winter weather. But sales also fell in December, with the decline attributed primarily to sales being pulled into November because of the late Thanksgiving weekend, as well as winter weather. Industry sales in December rose 0.3%, while GM sales fell 6% and Ford sales rose 2%.