By: Kathryn Casteel

Employment growth and gradual wage increases are continuing to drive consumers to spend on cars, trucks, and SUVs.

Auto dealers crossed another strong month off their calendars with sales up 7 percent from February of 2015, Ward Automotive Group reported Tuesday.

Last month Americans bought at a pace of a seasonally adjusted annual rate of 17.43 million vehicles. February’s numbers, though still strong, represent a slightly lower shift from January’s report of 17.46 million and the impressive higher numbers seen late last year.

Analysts expect sales growth to remain steady for the remainder of 2016, yet not as rapid or as record-breaking as growth observed in 2015.

With the workforce tip-toeing closer to full employment and wages gradually getting stronger, consumers are expected to keep spending on big ticket items like automobiles. However, these factors will also contribute to the Federal Reserve’s decision to raise interest rates over the course of the year as the economy becomes more stable, which could marginally impact auto sales.

Economists point to pent-up demand following the recession as explanation for the rapid growth in auto sales seen at the end of 2015.

“During the recession a lot of people held on to cars that really needed replacing and put off purchases, that in healthier times would have purchased them,” said chief economist at 4Cast Inc., David Sloan.

Sloan said this pent-up demand has been exhausted, but the underlying trends are expected to stay positive for the auto industry for the year.

Manufacturers sold over 1.35 million light vehicles in total, up from 1.25 million of February of last year. Auto dealers said the biggest sales increase came from SUV and truck purchases.

Ford Motor Company in particular saw the strongest growth among domestic dealers in the U.S. with a 20 percent increase in sales from last year. SUV sales, up 28 percent, were reported as the best February in history for the company. The demand for SUVs and trucks can be attributed to low oil prices allowing consumers to spend less at the pump for vehicles that require more fuel.

Chuck McMillan, general sales manager of Vic Bailey Ford in Spartanburg, SC, saw sales growth in his store despite a few ice storms that impacted the region and caused a few slow days. McMillan is confident sales will continue to be strong for the southern region as warmer seasons approach and coax buyers to the lot.

“The economy is strong,” McMillan said. “If people are making money, they’re going to spend it.”

Fiat Chrysler Automobiles, Nissan Group, and American Honda Motor all saw strong increases above 10 percent in sales, while Toyota Motor Group saw a smaller increase of 4 percent.

General Motors, the country’s largest domestic manufacturer, saw a slight decrease in sales with a 1.5 percent drop from last year. GM attributed the small decline to reducing their rental deliveries by 39 percent during February. Volkswagen AG, still recovering from an emissions-testing scandal, reported a 13 percent overall decline in sales for the month.

Even with the potential of interest rates rising, economists don’t expect the Fed to move aggressively enough to have a severe restraint on auto sales this year.

“The job market is really the key,” said Ryan Sweet, senior economist at Moody’s Analytics “If we continue to create 200,000 jobs per month, the unemployment rate continues to come down, and wage growth accelerates, that will more than offset the higher interest rates on vehicle loans.”