One year after Japan’s tsunami tripped up global auto production, the aberrations in supply that followed are diminishing the reliability of a widely used statistic. Investors need to carefully watch tomorrow’s results.
The seasonally adjusted annual rate, known as SAAR, uses recent history to account for fluctuations in demand over the course of the year. After shortages triggered by the March 2011 tsunami in Japan trimmed auto deliveries in the second and third quarters, seasonal adjustment estimates may be skewed for months starting with April’s U.S. vehicle-sales results to be announced tomorrow. Analysts estimate sales will be higher than a year ago and slower than the first-quarter pace.
The numbers aren’t just for geeks. Automakers use them to decide whether to boost or cut production; government policy makers study them to gauge the health of the economy; and investors parse them as a kind of box score of the market. The numbers this month and for the next few months will be open to even more interpretation than usual.
“It’s going to be a noisy month,” Paul Ballew, chief economist at Dun & Bradstreet and a former General Motors Corp. sales analyst based in Short Hills, New Jersey, said in a phone interview. Volatile gasoline prices, complicated year-ago comparisons and the warm U.S. winter make analysis more tricky. “You’re going to get some seasonal-factor anomalies,” he said.
Total light-vehicle sales in April may rise 0.9 percent to 1.16 million, the average of nine analysts’ estimates. Nissan Motor Co. (7201), Chrysler Group LLC and Toyota Motor Corp. may report the biggest sales increases, while General Motors Co. (GM) and Ford Motor Co. deliveries may drop from a year earlier. The SAAR may be 14.3 million, the average of estimate of 15 analysts surveyed by Bloomberg, an increase from 13.2 million a year earlier.
The April estimates are further complicated by a fluke of the calendar. Some statistics are typically calculated based on the month’s number of “selling days,” because vehicles historically weren’t available for sale on Sundays and holidays. April 2012 has three fewer selling days than the year-ago month did. There’s rarely more than a one- or two-day difference.
“The selling days are wild,” George Magliano, senior principal economist for IHS Automotive, said in a phone interview. The disparity in selling days means deliveries are “going to come in a bit light” and disguise improvement from last year’s results, he said.
A one-day adjustment changes the measure by about 4 percentage points. April’s three-day adjustment means that the difference between adjusted and unadjusted results is about 11 percentage points.
Auto sales have long been used as an economic indicator that shows consumers’ willingness and ability to make large purchases. Because of the selling-day disparity and potentially skewed SAAR statistics, April’s figures will require extra scrutiny and context, said Ballew, a former senior economist at the Federal Reserve. Even the weather is a factor, he said.
“You’re seeing this in other sectors like housing, for instance, where you got a relatively good result in January and February, not so much in March and then the early readings in April are tailing in the other direction,” Ballew said. “When you get exceptionally good weather in the first quarter, that’s going to cause some noise as well.
‘‘We’re going to try to pull it apart, really examining the first four months in total,” he said. “And when we do that, we see it’s been a good start to the year.”
One of Many
April’s SAAR figure by itself “really doesn’t tell the story of what’s happening out there,” Bob Carter, group vice president of Toyota (7203)’s U.S. sales, said in an interview. “It’s just one indicator we have in the market.”
Automakers also study 90-day moving averages, the size and turnover of inventory, and the mix of sales such as between cars and trucks, Ballew said.
A second consecutive month below February’s SAAR of 15.1 million might lead to disappointment about April sales results, Chris Ceraso, a New York-based analyst for Credit Suisse, wrote in an April 26 research note.
Monthly sales rates in the 14 million to 14.5 million range are “healthy and realistic” given economic fundamentals, while the February pace was inflated by unseasonably warm weather and pent-up demand for cars from Japanese automakers, Ceraso wrote.
The SAAR will probably decelerate from the 14.6 million rate averaged in the first quarter. Slowing sales may reflect data showing the U.S. labor market is losing momentum.
More Americans than forecast have filed applications for unemployment benefits in every week since mid-February, according to Labor Department figures. The Bloomberg Consumer Comfort Index declined to minus 35.8 in the period to April 22 from minus 31.4 the previous week, the biggest drop since March 2011.
Gasoline prices, which slipped from an 11-month high earlier in the month, probably didn’t drop enough to keep pickups from continuing to cede market share to cars, according to Barclays Capital estimates. Cars may account for 55 percent of industry deliveries in April, up from 54 percent in March and the 49 percent averaged the past two years, Barclays said in an April 24 report.
GM, the top-selling automaker in the U.S. and globally, may report a 9 percent decline in April sales, the average estimate of 11 analysts surveyed by Bloomberg. The Detroit-based carmaker is introducing new models such as the Chevrolet Spark small car later this year to boost U.S. market share that fell by 1.9 percentage points in the first quarter.
Ford (F), the No. 2 U.S. seller, may say deliveries fell 5.7 percent, the average of 11 estimates. Ford’s production hasn’t kept up with demand, so the company sees its U.S. market share dropping this year, Chief Financial Officer Bob Shanks told reporters after the company reported a first-quarter profit of $1.4 billion on April 27.
Nissan, Chrysler Up
Nissan, which passed Honda Motor Co. (7267) in March to rank No. 5 among in U.S. deliveries, may have increased deliveries 19 percent in April, the average estimate of eight analysts surveyed by Bloomberg. The Yokohama-based automaker showed a refreshed version of its Altima sedan at this month’s New York auto show that begins selling in July.
Chrysler may report a 16 percent sales gain for April, the average estimate of eight analysts. That would snap the Auburn Hills, Michigan-based automaker’s five-month streak of monthly sales increases exceeding 30 percent. Chrysler said last week that profit quadrupled to $473 million in the first quarter as U.S. deliveries of its 200 and 300 sedans more than tripled.
Toyota Eyes 10%
Toyota, the third-largest automaker by U.S. deliveries, probably increased sales by 10 percent in April, the average of eight analysts’ estimates. The Toyota City, Japan-based automaker increased its forecast for 2012 industry sales this month to the low- to mid-14 million unit range from 13.6 million, citing improvement in consumer confidence.
“We’re having another good month,” Toyota’s Carter said. “We’ll be up over 10 percent in terms of volume. It’s really being driven by two vehicles: Camry and the Prius family.”
Honda deliveries may decline for a second consecutive month, slipping 6.7 percent, the average estimate of eight analysts. The Tokyo-based carmaker’s inventories have only partially rebounded from last year’s tsunami, with 22 days’ supply of the CR-V crossover and 31 days worth of the Fit subcompact, according to Credit Suisse. The industry benchmark is about 60 days’ supply.
Volkswagen AG (VOW), which is on pace to exceed its target for more than 500,000 U.S. sales this year, may increase combined sales of its Volkswagen and Audi brand vehicles by 9.2 percent in April, the average of four analysts’ estimates.
Hyundai’s gains may may slow this year on tight production capacity and concern that quality might suffer after years of growth, John Krafcik, chief executive officer of the company’s U.S. sales unit, has said.
The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from April 2011. Forecasts for the seasonally adjusted annualized rate, or SAAR, are in millions of light vehicles.
April had 24 selling days, three fewer than the year- earlier period.
GM Ford Chrysler SAAR Rod Lache -6.0% -12% 16% 14.2 (Deutsche Bank) Peter Nesvold -8.7% -5.2% 16% 14.1 (Jefferies) Patrick Archambault -7.1% -6.8% NA 14.2 (Goldman Sachs) Joseph Spak -11% -5.5% NA 14.2 (RBC) Brian Johnson -8.8% -8.4% NA 14.2 (Barclays Capital) Emmanuel Rosner -6.8% -3% 13% 14.4 (CLSA) Chris Ceraso -12% 0.4% 15% 14.3 (Credit Suisse) John Sousanis -6.3% -6.7 14% 14.4 (Ward’s) Adam Jonas NA NA NA 14.4 (Morgan Stanley) George Magliano NA NA NA 14.2 (IHS Automotive) Jeff Schuster NA NA NA 13.8 (LMC Automotive) Alan Baum NA NA NA 14.5 (Baum & Associates) Jessica Caldwell -7.3% -6.5% 19% 14.4 (Edmunds.com) Jesse Toprak -10% -3.9% 18% 14.6 (TrueCar.com) Alec Gutierrez -15% -5.4% 14% 14.0 (Kelley Blue Book) Average -9% -5.7% 16% 14.3 The following table shows selling-day adjusted estimates for company car and light-truck sales as a percentage change from April 2011. GM Ford Chrysler Rod Lache 5.7% 1.3% 31% (Deutsche Bank) Peter Nesvold 2.7% 6.7% 31% (Jefferies) Patrick Archambault 4.5% 4.9% NA (Goldman Sachs) Joseph Spak 0% 6% NA (RBC) Brian Johnson 2.6% 3% NA (Barclays Capital) Emmanuel Rosner 4.8% 9.2% 27% (CLSA) Chris Ceraso 2% 7% 26% (Credit Suisse) Average 3.2% 5.4% 29%
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