Mighty May auto sales show US economy in sweet spot

Bloomberg

Auto sales were supposed to slow again this year. But with the US economy chugging along, car shoppers keep strolling into showrooms.
The pickup in hiring and President Donald Trump’s tax cuts have helped keep new-vehicle demand humming. Almost every automaker’s May results beat analysts’ estimates, and several posted increases, led by Fiat Chrysler Automobiles NV’s 11 percent jump. Profitable sport utility vehicles and pickups also are defying rising gasoline prices and interest rates.
“It’s like the best of both worlds,” said Charlie Chesbrough, senior economist for
researcher Cox Automotive. “We’re seeing economic activity has just really started to pick up in a lot of sectors,” thanks to a “sweet spot” of job growth with tempered wage increases.
Ford Motor Co. eked out a surprise US sales gain last month, buoyed by the best May in 18 years for its cash-cow F-Series truck line. A 29 percent surge for the Jeep sport utility vehicle brand carried Fiat Chrysler to a bigger-than-expected gain. And Japan’s three biggest carmakers also beat analysts’ estimates on strong demand for Nissan Rogue, Honda CR-V and Toyota Highlander crossovers.
“The only thing you can really point to would be that tax reform that happened at Christmas time — that additional money consumers are taking home with them is having a positive impact on their wallets and their confidence,” Chesbrough said.

STEADY MARKET
After seven years of growth, capped by a record 17.6 million deliveries in 2016, the US auto market contracted last year and was expected to dip below 17 million in 2018. But so far this year, the annualised rate of sales has topped 17 million in every month, according to researcher Autodata Corp.
With five of the biggest automakers in the US having beaten May estimates, the seasonally adjusted pace of sales probably beat the average projection of 16.7 million cars and light trucks. General Motors Co., the biggest US automaker, stopped reporting monthly results after March.
Even expensive gasoline isn’t the economic bugaboo it once was. American consumers are shrugging at the sight of pump prices nearing $3 a gallon for the first time in years and plowing ahead with purchases of big pickups and SUVs.

SUVS ACCELERATING
With the US unemployment rate matching the lowest in 48 years and consumer confidence on the rise, gasoline will have to get more expensive to have any meaningful impact in buying patterns. The light truck segment — which includes pickups, SUVs and crossovers — has been seizing record share of the US auto market, prompting Ford and Fiat Chrysler to
pull the plug on many of their passenger cars.
“The movement into SUVs and out of cars is accelerating,” Mark LaNeve, Ford’s US sales chief, said on a conference call. “If fuel prices become a concern for the customer, instead of moving into a sedan, they move into a smaller SUV or a newer one with better fuel economy.”
So far, Nissan has seen no impact from rising fuel prices, said Billy Hayes, the US division vice president for the brand in the US.
“The market doesn’t seem to be responding to fuel prices at all,” Hayes said in a phone interview. “We’re not hearing about any reaction from consumers.”