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Jobs recovery to bolster auto sales: analysts

April 15, 2011
U.S. automobile sales this year may rise faster than first anticipated, with analysts saying that an improving job market will prevent 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 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, which kept its estimate at 12.9 million. “There’s still that issue of pent-up demand we see in the marketplace that you can’t ignore.”
The U.S. economy added jobs for six straight 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 Labor Department 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.
Oil Prices, Japan
The higher cost of oil accounts for a 150,000-vehicle reduction in IHS’s 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. “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 non-revolving credit, which includes borrowing for autos, the Federal Reserve reported April 7.
Creditors are again warming to consumers, and consumers are doing everything to improve their standing so the two hopefully can meet in the middle.