Depression, No; Recession, Yes: Comerica Bank

The $700 billion financial-services bailout, additional billions of dollars in extended insurance from the Federal Deposit Insurance Corp., more than $1 trillion in loans from the Federal Reserve, and an injection of $250 billion in new capital for banks have managed to head off a depression, but a U.S. recession is upon us.

That's according to Dallas-based Comerica Bank, which historically has close ties to Detroit and the auto industry. "While a collapse in the economy has been avoided, the normal flow of economic reports makes it quite clear that a recessionary dynamic has already taken hold," said Comerica Chief Economist Dana Johnson, in an Oct. 22 note.

The last nine U.S. recessions lasted an average of 10 months. Together with other data, that suggests the current recession could last through the summer of 2009, Johnson said.

Meanwhile, the auto industry is responding the old-fashioned way, by cutting prices. Comerica reported earlier that the average new-vehicle price was the lowest since 1980, measured in terms of the average U.S. household income, for the second quarter of 2008. Rebates and incentives have likely gotten higher since then.

According to Comerica's Affordability Index, it took 23.1 weeks worth of the average U.S. family income to purchase a new vehicle in the second quarter, the latest period for which data is available. That was 0.9 weeks less than the previous quarter, and 1.9 weeks less than the year-ago quarter, the bank said. Including finance charges, the average new vehicle cost $27,704, Comerica said.

That's good news for consumers, provided they can get financing. Comerica expects that with all the government intervention kicking in, "it won't be long" before credit starts to flow again. The biggest remaining worry, according to Comerica: falling home values.