July U.S. Auto Sales Rise Over June

DETROIT July 26, 2003 John Porretto writing for the AP reported that aided by hefty incentives and some improvement in consumer confidence, U.S. auto sales are expected to rise in July from last month but fall well below last year's levels.

Some analysts say it's unfair to gauge the state of the industry this month by comparing it to July 2002, when automakers, led by General Motors Corp., cleared out old models with blowout incentives.

The result was an extraordinarily high seasonally adjusted annual sales rate of 18.1 million.

"Although it's invisible in the year-to-year comparisons, a modest and somewhat irregular recovery in U.S. vehicle sales has developed since February," said David Healy, an analyst with Burnham Securities, in his monthly sales forecast. "July sales will probably continue this pattern."

Healy notes that except for May, each month's annual selling rate this year has beaten the previous month. June's level was 16.4 million. Healy expects a rate of about 17 million when automakers report July results next Friday.

The seasonally adjusted annual rate, known as SAAR, indicates what sales for the full year would be if sales remained at the same pace for all 12 months.

"Unfortunately, vehicle sales don't come with footnotes explaining why the buyer bought," Healy said. "One could plausibly argue that this year's mild recovery is due to sales incentives," which have risen from about $2,900 a vehicle in February to more than $3,900 this month.

"On the other hand, the recovery might be explained by the Iraq war's end, new tax cuts, an economic recovery that may be starting to gain momentum -- or all of the above," he said.

Merrill Lynch analyst John Casesa forecasts a sales rate of 16.8 million for July. Because of the tough comparison, Casesa expects GM's year-over-year results to be down 10 percent to 15 percent in July. He predicts Ford to be down 10 percent and DaimlerChrysler's domestic brands to be down 4 percent to 5 percent.

"As has been the case for some time, Toyota, Honda and Nissan should all gain ground in July," Casesa said in a research report that ends with this conclusion for the industry: high incentives, moderate sales, low profits.

Art Spinella of CNW Marketing Research says the outlook for new vehicle sales should be positive, but CNW's non-automotive surveys indicate an intriguing problem: Most consumers say they've bought virtually every major "essential" product they need.

Put simply, Spinella said, many people find themselves strapped for cash.

"But there's plenty of nonessentials, they tell us, that are enticing, so expect a solid bounce for the economy soon," he said.