Jobs recovery may push auto sales past estimates

U.S. automobile sales this year may rise faster than analysts had earlier anticipated as the improving job market prevents higher gasoline prices and supply disruptions in Japan from derailing the industry’s recovery.
Total sales of cars and light trucks may rise to 13 million this year, the average of 18 analysts’ estimates compiled by Bloomberg. The average estimate was 12.9 million in a Bloomberg survey of 17 analysts in January. Light-vehicle sales last year rose to 11.6 million from a 27-year low in 2009.
Auto sales ran at a seasonally adjusted annual rate of 13.1 million in the first quarter, the fastest pace since the quarter ending June 2008, according to Autodata Corp. Demand held up while gasoline prices rose to the highest in more than two years and Japan’s earthquake disrupted production and tightened inventories of some models.
“Despite it all, people still need cars,” said Jessica Caldwell, an analyst at industry researcher Edmunds.com, which kept its estimate at 12.9 million. “There’s still that issue of pent-up demand that we see in the marketplace that you can’t ignore.”
The U.S. economy added jobs for six consecutive months through March, with payrolls rising by 478,000 in the first quarter, and the unemployment rate fell to a two-year low of 8.8 percent, according to U.S. Department of Labor figures.
Seven analysts raised their estimates for full-year auto sales since the beginning of the year. IHS Automotive lowered its estimate to 12.9 million vehicles, from as high as 13.3 million in February, citing higher oil prices and disruptions following Japan’s earthquake.
The higher cost of oil accounts for a 150,000-vehicle reduction in IHS’ estimate, and Japan-related production losses account for the remainder, said George Magliano, a New York-based senior economist for the researcher.
“We’re a little more optimistic on the job market, which we think has finally turned,” Magliano said in a telephone interview. “Credit has begun to loosen up a bit more. That made us feel better about where the year was going. Now, we’ve got two things working against us.” U.S. consumer borrowing rose for a fifth-straight month in February on an increase in nonrevolving credit, which includes borrowing for autos, the Federal Reserve reported April 7.
Lenders began expanding credit to new-car buyers last year, according to Experian Automotive, which tracks auto-lending data. Buyers with nonprime or weaker credit scores accounted for 19.8 percent of the new-vehicle financing market in the fourth quarter, up from 16.8 percent a year earlier, Costa Mesa, Calif.-based Experian said.
“The lenders are coming to the consumers, and the consumers are doing everything they can to improve their standing so they can hopefully meet in the middle,” said Dan Montague, an analyst at the Autofacts forecasting unit of PricewaterhouseCoopers LLP, which raised its estimate for full-year deliveries to 13 million from 12.5 million.
Toyota Motor Corp., the world’s largest carmaker, has said it lost 140,000 units of production from March 14 to March 26, citing a shortage of electronic parts, rubber and plastics. The company said it may lose output of 35,000 vehicles at its North American factories through April 25.
A shortage of vehicles for Japan-based automakers, including Toyota, Honda Motor Co. and Nissan Motor Co., will be a temporary headwind, said Efraim Levy, an analyst with Standard & Poor’s Equity Research, which kept its 13 million 2011 sales estimate.
“There will be some makeup of those sales in the second half of the year, but in general consumers will mostly opt to find an alternative vehicle and purchase now, rather than wait,” said Levy, who’s based in New York. “That’s a potential benefit to U.S. and Korean automakers and a minor impact on overall sales for the year.” &#8226