Auto sales dipped in March but auto manufacturers remain confident due to strong job growth.
Manufacturers reported mixed reviews last month, suggesting that auto sales are beginning to level out from their record highs from last year.
Americans purchased vehicles at a pace of a seasonally adjusted annual rate of 16.43 million vehicles last month, much lower than February’s number of 17.43 million and the expected 17.2 million originally predicted by automotive research company Kelley Blue Book. Although these numbers were below expectations, overall they’re still reasonably high.
Some dealers were a bit slower than forecasted, but kept a positive outlook for the future of consumer spending in result of this month’s strong job report released Friday. The 215,000 added jobs and slight uptick in wages are expected to keep driving consumers toward vehicle purchases, just not in as high of a number as last year.
“Auto sales are quite driven by the health of the consumers, and consumers have been doing well given labor market and rising incomes,” said Russell Price, senior economist at Amerprise Financial Inc. “But we’re likely to see things level out.”
In sum, manufacturers sold close to 1.6 million light vehicles.
Some dealers held on to their strong performance from February, including Nissan Group, who saw a 13 percent surge in sales. Fiat Chrysler Automobiles, Honda Motor Co., and Ford Motor also saw substantial increases in sold vehicles around 8 to 9 percent for March respectively.
However, General Motors, America’s biggest car manufacturer, gained less than a percent in sales, while Toyota Motor Group saw a decrease in sales around 2 percent. Volkswagen AG, continuing to suffer from an emissions-cheating outrage, saw another month in the negative with a sales decrease of 10 percent.
SUVs and pickup trucks remain some of the strongest selling vehicle segments among manufacturers. Although the average price of gas in the U.S. trickled up to $1.91, it is still much lower than last year and in line with where prices were in January. Economist say it’s still a sustainable price for consumers to handle, which allows them to continue purchasing larger cars and trucks.
Mark LaNeve, V.P. of U.S. Marketing, Sales and Service at Ford, says millennial consumers are particularly driven to SUV purchases. Past data shows that this age group, made up of those born between 1982 and 2000, tend to get their licenses and form families a little later than older generations. But dealers, like LaNeve, say they’re starting to show up to buy cars as slowly begin to fall into these trends.
“They eventually do all of those things, and when they do they really like SUVs,” said LaNeve. “They’re shopping and buying them at an increasing pace, which is a good sign for our future.”
Economists say millennial activity in the economy is important because they are the next generation of big item consumers, and consumer spending is the driving force of the economy.
Tony Ream, 24, of Spartanburg, SC, recently got a job this year as an underwriter for a commercial lender. Feeling the benefits of a strong job market, Ream was promoted only six weeks in and recently purchased a new Toyota 4Runner from a local dealership.
“I went hoping I’d score a good deal since it was towards the end of the month and the dealerships are trying meet their quotas. Luckily for me, I was right,” said Ream.
Economists say low interest rates, along with a stable job market, will keep drivers purchasing vehicles, though diminishing demand from post-recession purchases is evident in the March numbers. But as the U.S. creeps toward full employment, speculation grows that Federal Reserve could start to raise rates and make financing a vehicle a little more of a burden. However, economist say it’s not likely.
“The Fed obviously has struggled with just how quickly to raise rates,” said Robert Hughes, senior research fellow at American Institute of Economic Research. “Global growth has been challenged, to say the least, so that’s been a factor, so even if they got a strong report they’re going to be very timid.”