US auto industry is on strongest sales pace since 2005

Article by Andrew Christian, on July 2, 2015

Sales in the U.S. are on pace to exceed 8.5 million units in the first six months of the year after having had an astounding performance last May. Forecasters estimate that the industry will end the period with a 5% gain to achieve the best spring in a decade. LMC Automotive and Kelley Blue Book forecasters both raised their forecasts for the full year to 17.1 million units to match TrueCar’s estimates.

With sales likely to be more than 8.5 million units for the first half of 2015, the industry will have its best first half as well as second quarter since the year 2005, when there was a sudden increase in demand due to deals that gave discounts to employees.

In a statement, Jeff Schuster, senior vice president of forecasting at LMC, said that this is the “strongest and healthiest” that the auto industry has been in a long time.

He explained that their prediction of achieving 17.1 million units in the second half of 2015 is supported by an optimistic outlook throughout a range of metrics, which include “economic support, gas prices, the stock market, higher and stable transaction prices and significant product activity.” LMC anticipates that consumer spending on new vehicles in the first six months of 2015 will break records with sales of $206.2 billion.

This figure is higher by $11.6 billion than the same period in 2014. It’s believed that June 2015 sales will be around 1.5 million units, leading to a 4.7% gain in the first half. Notably, it was in 2001 that sales last exceeded 17 million units.

To achieve this number this year, sales in the second half of the year will have to increase by only 1.1% compared to the same period the previous year. Both TrueCar and KBB both estimate that the seasonally adjusted, annualized selling rate in the industry will be 17.4 million in June.

This figure would be lower than the rate in May of 17.8 million (the best-ever May in history) but higher than the 16.9 million rate recorded in June 2014. Edmunds had said that it predicts 17.3 million for the June SAAR while LMC has a 17.2 million estimate. June 2015 has one extra selling day than in June 2014.

In a statement, Jessica Caldwell, Edmunds’ director of industry analysis, said that the auto industry has retained the strength it showed in May when it broke sales records. She said that the deal offers that were available in May were extended into June in numerous states in the country. She pointed out that promotions for the Fourth of July holiday are expected to start this week.

She believes that these offers will aid in sustaining the momentum until the first weeks of summer. KBB’s senior analyst Alec Gutierrez said that sales may start to “flatten out” in the later part of summer.

If the pace recorded in the first half of the year continues, it’s estimated that sales for the entire year will be more than 17.3 million. This puts the rate very near the standing record of 17.4 million achieved in 2000.

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