This Week's Sales Numbers Hold A Small Surprise

By Jeremy Anwyl August 18, 2011

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We at have spent a fair amount of time this week discussing August car and truck sales. Our view is that consumers' reaction to the stock market flip-flops and noise surrounding the Standard & Poor's downgrade of U.S. debt, the rancorous debate around the U.S. debt ceiling and the sovereign debt situations in Europe will set the course for vehicle sales for the balance of the year. In short, August sales are worth watching closely.

Four weeks ago, I felt that the improved supply of vehicles following production disruptions due to the March 11 earthquake in Japan, lower vehicle prices and auto manufacturer-sponsored sales events in August would lift sales into the upper 12 million range on a Seasonally Adjusted Annual Rate (SAAR) of sales basis. That, of course, was before the aforementioned noise and flip-flops came out of left field. Sales could have easily dropped in August into the 11 million SAAR range. A look at last week’s sales showed early results were tracking at around 10.1 million retail SAAR rate for a total SAAR rate of 12.1 million. Not bad considering.

But this was before the worst of the turmoil hit. Polling our analysts earlier this week, the guestimate was that sales would drop from this level before recovering closer to month end, assuming the financial markets stabilized.
So it is a pleasant surprise to see the data this week shows sales are actually up, albeit slightly, from last week.The pace after two weeks is for retail sales to end up around 882,000 units for a retail SAAR of 9.9 million vehicles. Add in fleet sales and the total SAAR should be 12.2 million - essentially flat with July.

As I surmised in last week’s commentary, high prices and limited supply caused buyers to defer vehicle sales earlier this year. This, combined with sales put off from the recession, seem to give current sales enough momentum to push through recent chop in the market. This is obviously encouraging, and I would expect further improvement in the sales tempo over the balance of the month, perhaps even to the point that sales hit 12.4 million SAAR for the full month. So far, this doesn’t seem to be in the cards, but there is still time.

Still some market speed bumps exist. Honda is behind the other Japanese manufacturers in terms of rebuilding inventories. Transaction prices are generally still above pre-quake levels, although this comparison is becoming less meaningful as the mix of vehicles selling shifts to the new 2012 model year. Even considering these issues, the odds of an upward sales bump in September and October seem to be increasing.

Looking deeper there are some interesting changes in retail sales share, when comparing August sales so far with sales in the same period in July. Nissan is the big gainer, and this is on top of share gains in July as well. Toyota is regaining ground, while Chrysler is losing share. Obviously lots still could go wrong, but overall, sales look surprisingly solid. More next week.

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