News from Notch Consulting, Inc.

July 23, 2012

US car sales weaken in July following strong June

Filed under: Auto — Notch @ 1:17 am

The Associated Press reports that the raft of gloomy economic news may be starting to hurt U.S. auto sales.

Industry analysts and dealers said this week that sales during the first half of July slowed a bit from the robust pace in June. But they still were expected to be better than July of 2011.

For the first half of the year, sales of cars and trucks ran at an annual rate of 14.3 million, the best pace in 5 years. Car buyers bought everything from compacts to big pickups, making the auto industry a bright spot in the economy. The only hiccup came in May, when sales slipped to a 13.8 million annual rate as the stock market plunged. Buyers returned in June to drive sales back up to a 14.1 million rate.

Jeff Schuster was expecting sales to tail off in the early part of July, partly because promotions leading up to Independence Day may have pulled sales ahead into June. The senior vice president of forecasting at the LMC Automotive consulting firm in Troy, Mich. predicts July sales likely will come in at an annual rate below 13.8 million.

“With the weaker consumer confidence, the auto industry could be in for a roller-coaster second half, but it isn’t time to sound the alarm yet,” said Schuster, who is sticking with his forecast of 14.5 million sales for the full year.
If Schuster’s July forecast holds, sales would eclipse the 12.2 million rate of last July. Sales have come a long way from the doldrums of 2009, when only 10.4 million cars and trucks sold during the financial crisis. The recent peak for sales was 2005, at 17 million.

Dealers surveyed by Citi Investment Research analyst Itay Michaeli also reported a slow start to July. But Michaeli noted that auto sales normally are stronger in the final two weeks of a month as discounts kick in and dealers try to make monthly goals.

Not all analysts are predicting a big sales drop for July, though. Edmunds.com predicts an annual rate of 14 million, and Wardsauto.com is at 14.1 million. Ward’s analyst John Sousanis said he expects factors that fueled strong sales during the first half to continue. He said owners of car fleets, like governments and rental car companies, need to replace aging vehicles the same way individual owners do.

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