U.S. consumers continued buying new cars and trucks at a brisk pace in July,
but there are growing concerns that industry sales will slow down as the year
grinds on.
While automakers won't report July sales until Wednesday, most industry
forecasters expect July to come in about 10 percent higher than July 2011 even
though the overall U.S. economy has slowed and consumer confidence is falling.
"Automotive sales are essentially moving in a direction that is not
consistent with the general economic news," said Jeff Schuster, senior vice
president of forecasting for LMC Automotive.
LMC Automotive, Ed-munds.com and TrueCar.com all expect that industry
sales ran at an annualized rate of 14.0 million or higher in July -- a rate
that would be viewed as a sign of continued strength for automakers and the
broader economy.
For now, the industry is still enjoying a slow, but steady sales rebound
because people who held onto cars during the recession are finally springing
for new models. Buying a car also has become easier because banks that froze
lending in 2008 and 2009 are increasingly willing to make loans to people with
slightly riskier credit records.
"Basically, there are a lot of people out there who have not bought cars
for the last 4-5 years because they have been shut out of the market," said
Lacey Plache, chief economist for Edmunds.com.
On average, the age of cars that consumers are trading in exceeds 6.2
years, Schuster said. That's about a year older than before the 2008 recession
began.
Also, the introduction of a number of new models in high-volume segments
such as the all-new Dodge Dart compact car, redesigned Ford Escape SUV and
redesigned Nissan Altima midsize sedan are helping to spark consumer interest,
Plache said.
New product introductions, especially in high-volume segments, often
generate interest and boost industry sales.
But on Friday, the U.S. Department of Commerce said the U.S. economy grew
at an annual rate of 1.5 percent for the three months ending June 30. That was
a sharp decline from the 2.0 percent annual rate for first three months of the
year.
Also, confidence among U.S. consumers dropped in July to the lowest level
this year. The Thomson Reuters/University of Michigan final index of sentiment
declined to 72.3 this month from 73.2 in June. Meanwhile, the nation's
unemployment rate remains above 8 percent.
There also is a continuing risk that Europe's deepening recession could
further slow the U.S. economy.
"We are not on as solid of ground as we might like to be going into the
second half of the year," Plache said.
Schuster doubts that new car sales will slow much in coming months.
"But I don't think we are going to see the increases that many expected
in the second half," he said.
