Auto sales improved modestly in February leading economists to expect continued growth this year as the economy steadily recovers from the recession.
“As the economy improves, sales improve. It may be at an anemic pace, but it is still a recovery,” said Hugh Johnson, chairman of Hugh Johnson Associates.
Overall sales in February totaled 1.19 million, a 3.7 percent increase when compared to a year ago, according to data from Motor Intelligence. Ford and General Motors led the way in increasing sales, with the former improving 9.3 percent and the latter 7.2 percent.
The increase was driven in large part by sales of pick-up trucks. The nation’s two best selling vehicles in February were pick-up trucks, the Ford F-Series and the Chevrolet Silverado.
Sales of new automobiles are often tied to growth in the housing market, which has been recovering in recent months, said Carlos Gomes, an economist at Scotia Bank. In January, new building permits for housing were at a seasonally adjusted annual rate of 925,000, a 35.2 percent increase over the previous January, according to the U.S. Census Bureau.
“The reality is that if you look at the housing market, it’s the first sector to turn. Typically after that, the auto market revs up as well,” Gomes said.
Ford said that the F-Series had its best February sales since 2007 and that this was its nineteenth consecutive month of sales increases, another sign that the nation’s economy was recovering from the recession. Moreover, Ford said that it would be increasing production in the second quarter of 2013 in order to meet the increasing demand.
Gomes added that the increase is also driven by the fact that the average age of Americans’ cars is now twelve, whereas it was nine before the recession.
“They have to replace their clunkers,” Gomes said.
To replace their aging automobiles, consumers continued to increasingly buy small cars over midsize vehicles in February. Sales of the former grew 5 percent while the latter declined 3.2 percent when compared to February 2012. Johnson said that new car buyers were favoring small cars, in part, because they were more fuel-efficient.
“When the price goes up at the pump, that influences people,” he said.
Bucking the trend of increased sales, however, were Nissan and Honda. The two Japanese companies experienced declines of 6.6 percent and 2 percent respectively. Johnson said that this was due to supply disruptions in East Asia, and that like other auto manufacturers, they would experience overall growth this year.
Toyota, the third largest seller of automobiles in the United States, experienced modest sales growth, improving 4.3 percent when compared to last year.
Gomes said that one shouldn’t worry about small drops in monthly sales.
“The industry is on a solid upswing. You will get month-to-month volatility, but those are just wiggles. The trend is one of upward sales,” said Gomes.