While the U.S. economy continues to struggle, the auto industry was able to reach a major milestone in September. The housing market is unstable and unemployment remains at slightly higher than 8%. But the auto market, which had appeared to be the weakest, is steadily improving. The Automotive News data center said that when considering seasonal adjustments, cars and light trucks get at an annualized rate of 14.9 million.
This is its highest rate since March 2008, before the Lehman Brothers Holdings Inc. failed. More consumers are trading in their old thirsty vehicles for new, fuel-efficient models. Last month, small car sales increased by 50% as gasoline prices remained at higher than $3.75 a gallon.
Mark Zandi, chief economist at Moody’s Analytics, said that its pickup sales, which are typically linked to the emerging housing industry, are up this year. He said that in this economy, autos are the “bright, shining star.” He said that this is the “key cog” of the economy. He believes that the overall economic recovery would be much weaker if the automotive industry hadn’t recovered.
Diane Swonk, chief economist with Mesirow Financial in Chicago, said that U.S. auto sales are on track to increase by at least 10% for the third straight year but this could still be better. The auto market will continue to improve as consumers get positive equity in their homes and the housing market begins to do well again.
From 2000 to 2007, there was an average of 16.8 million annual deliveries in the U.S. Swonk said that the auto recovery is nowhere near predictions considering the number of new drivers and the level of pent-up demand. He said that the auto industry has the advantage that not all sectors have. He believes that when the home, the people’s biggest asset, moves up in value, it will make a huge difference.