Analysts Lower U.S. Auto Sales Forecast and Rebound, Cites Unemployment as a Factor

Bloomberg recently asked a total of 12 auto industry analysts to provide their U.S. sales forecast for the remainder of 2011 and the outlook isn’t good; Averaged together, they predict a seasonally adjusted annual rate of 11.8 vehicles, which is lower than the 12.5 million average the U.S. auto industry experienced through the first half of this year.

Among the many reasons for the lowered forecast? Unemployment and consumer confidence.

The report states that unemployment rose to 9.2 percent during the month of June and that employers only added 18,000 jobs, the smallest gain in nine months. Not surprisingly, consumer sentiment dropped to 63.7 last month, which is the weakest since March 2009.

“This curve of unemployment looks like it’s got a lot of legs,” Mark Wakefield, an AlixPartners director in Southfield, Michigan, said in a telephone interview. “This is one of the first recent cycles where demand is not going to go back above its prior peak, because there are just so many structural things that are different this time around.”

The adjusted rate of 11.8 million vehicles is much lower than the magic number of 16.8 million, the average annuals sales when the auto industry was humming along during the good years of 2000 to 2007. The lowered numbers are also a result of the March 11 disaster in Japan that caused a worldwide parts and inventory shortage for most automakers including Toyota. Analysts have predicted that Toyota will suffer a 25-percent decline in deliveries this year, while Honda is expected to experience a 23-percent decrease.

On the other hand, the Detroit 3 are expected to post sales increases for the year, though the final numbers won’t be as strong since a few models weren’t able to keep up with demand.

“There is a lot of ‘what-ifs,’” Ford’s Booth told reporters on the company’s July 26 second-quarter earnings call. “We honestly couldn’t follow up the increased demand for small cars during the second quarter because we are flat out on Fiesta, and we are flat out on Focus.”

In all, consultancy group AlixPartners LLP expects the auto industry to lose 1.5 million in projected sales in 2011 and the sales drag to continue into next year.

Source: Bloomberg