For the month of February, auto sales in the U.S. were on course to achieve a fourth consecutive month of strong sales. The U.S. housing market experienced gains, reducing concerns over a series of U.S. federal spending cuts slated to start on Friday. Morgan Stanley analyst Adam Jonas said that for February, the annual U.S. auto sales rate is expected to come in at approximately 15.3 million vehicles.
This exceeds the 15.1 million rate that economists expected, according to a poll conducted by Thomson Reuters. Since November, this rate has held above the 15 million-vehicle mark indicating that increasing home values are helping American consumers have more confidence about purchasing a new vehicle. This increase takes place during a time when the average vehicle on the road is a record high of 11 years old and going past the point that it can be fixed. Kurt McNeil, head of U.S. sales operations for General Motors Co., said that the “escalator” is on its way up instead of down.
GM had revealed that it posted a sales increase that exceeded their expectations. Sales of pickup trucks for the month had been boosted by increased housing construction. McNeil said that small business owners accounted for 40% of truck sales, offering a "strong vote of confidence in the underlying economy.” GM, the biggest U.S. automaker, reported an almost 30% increase in the sales of its Chevrolet Silverado trucks. Meanwhile, Ford Motor Co's F-Series gained 15.3%.
During conference calls last Friday, Ford and GM executives claimed that improvements in the housing market and the building up of the demand for new vehicles made up for the risks posed to the bigger economy by the across-the-board "sequestration" U.S. budget cuts. Ford Chief Economist Ellen Hughes-Cromwick said that U.S. consumers are displaying "nerves of steel" as they’re confronted with budget cuts. She explained that these cuts would remove around half a percentage point from GDP growth if completely realized. Monthly car sales are considered an early indicator of economic health. It’s now the fourth year since the auto industry was hit hard by a financial crisis that led to the bankruptcy of GM and Chrysler Group LLC in 2009.