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(Bloomberg) — An improving job market and cheap gasoline is likely to add 200,000 more car sales this year than analysts estimated just two months ago, according to a new survey.
After a strong finish to 2014 — November and December were two of the year’s three best months — most analysts surveyed by Bloomberg increased their 2015 estimates, raising the average projection to 16.9 million deliveries. As recently as mid-November, the average estimate was for sales to rise about 200,000 to 16.7 million cars and light trucks for a sixth consecutive year of growth, the longest streak since at least World War II.
“Number one, the U.S. economy is showing more strength today, and we adjusted our figure based on the jobs reports,” said George Magliano, senior principal economist at IHS Automotive and an analyst who contributed to the survey. “Number two, energy and oil prices falling are a big boost for consumer confidence, and people are going out and buying cars and trucks,” Magliano said.
The sales year starts with the top six automakers projected to increase sales by more than 10 percent from a year earlier, when shoppers stayed away from showrooms amid the coldest January in two decades for the contiguous U.S. states. The annualized selling rate, adjusted for seasonal trends, probably rose to 16.5 million cars and light trucks — the fastest January pace in nine years — from a 15.3 million pace a year earlier. Results will be released Tuesday.
Twelve of the 13 analysts surveyed boosted their estimates from November. None lowered a projection. And the average estimate now is for twice as much growth as they anticipated in November.
Strong Economy
Like auto sales, the U.S. economy also improved in the second half of last year. The Commerce Department said the gross domestic product rose at a 5 percent annual rate in the third quarter — the fastest since 2003 — largely because of an increase in consumer spending.
Almost 3 million jobs were added last year, bringing the unemployment rate down to 5.6 percent, a more than six-year low. And the fewest Americans in almost 15 years applied for unemployment benefits last week, which was shortened by the Martin Luther King Jr. holiday.
At the same time that jobs are coming back, fuel prices have been falling. The average price of a gallon of regular gasoline in the U.S. was $2.044 on Wednesday, 45 percent less than the $3.696 it was selling for on April 26, according to AAA, the driving club.
Consumer confidence increased this month to the highest level in more than seven years, the Conference Board reported this week. Another measure, the University of Michigan’s final consumer sentiment index, jumped to an 11-year high.
“People are more confident, and they have more money in their pockets to spend on cars,” said Beau Boeckmann, president and owner of California’s Galpin Motors, the largest Ford retailer in the country. “The pent-up demand, especially for trucks, is what we’re going to see in 2015. It’s definitely the year of the truck.”
January Joy
Boeckmann and other Ford dealers will have to wait until at least the second quarter for the Dearborn, Michigan-based automaker to reach full production of its redesigned, aluminum-bodied F-150 pickup. Tight truck supply is why analysts project Ford Motor Co.’s sales rising 13 percent, less than General Motors Co.’s 19 percent or Fiat Chrysler Automobiles NV’s 14 percent in the month.
Light-vehicle sales may total 1.16 million for the month, a 14 percent increase from a year earlier. Analysts estimated that Toyota Motor Corp. and Honda Motor Co. will increase sales by 13 percent and that Nissan Motor Co.’s will rise 11 percent.
“Although January isn’t the most telling month for full-year trends, we’re encouraged by this early momentum,” Itay Michaeli, Citigroup Global Markets analyst, said in a research report.
January is typically a slower sales month for automobiles, as it usually follows a boom in holiday car sales. Sales were particularly strong in November, when the annualized rate reached 17.2 million, and December, when it was 16.9 million.
Early in 2014, severe winter weather suppressed new-vehicle demand. But the sales lost in January were made up in later months, and the full-year light-vehicle sales eventually totaled 16.5 million, the most since 2006.
“Last year’s weather is a good example of how, historically, January hasn’t been the most predictive month,” Michaeli said in an interview with Bloomberg. “But there are years left to go in terms of pent-up demand, and we’re seeing that this month.”
