Auto Sales Seen Buoyed by Low Rates in U.S., Dealer Group Says

The National Automobile Dealers Association predicts the Federal Reserve will hold off on raising interest rates through the summer, giving vehicle sales a boost that can offset slow economic growth in the start of the year.

Weak economic growth in the first quarter indicates that the Fed will maintain rates until September, Steven Szakaly, NADA’s chief economist, said Monday on a conference call. U.S. gross domestic product for the period will probably rise 2.1 percent, he said, which led NADA to reduce its 2015 forecast for GDP growth to 2.9 percent from 3.1 percent. Still the group maintained its sales forecast for the year, anticipating that interest rates will remain low.

“On the very positive side, we do see a lot of room for the Fed to maneuver,” he said on the call. Maintaining low rates “is very, very good, of course, for motor-vehicle sales and the rest of the economy,” especially during the peak sales months of the spring and summer.

Light-vehicle sales in the U.S., which rose 9.2 percent for the first two months of the year despite the bitter cold, have been boosted by low interest rates that have reduced borrowing costs. Rising consumer confidence, an improving labor market and cheaper gasoline have also contributed to what analysts project will be a sixth straight year of growing auto sales.

Auto sales will probably rise for a record sixth year in a row, Szakaly said, a pattern than will probably continue this month. NADA, which represents about 16,000 new-car dealers, estimated a March selling rate, adjusted for seasonal trends, of 16.9 million, in line with the average of 13 analysts’ estimates. A year earlier the selling rate was 16.5 million.

March Estimates

Unit sales of cars and light trucks in March probably slipped 0.8 percent to about 1.52 million vehicles, according to the average estimate from 10 analysts. Although the absolute number of vehicle sales may slip, the selling pace could still accelerate because it’s calculated on the basis of the number of selling days, and this March has one fewer than in 2014. Carmakers will report results Wednesday.

Toyota Motor Corp. may report the biggest year-on-year gain among the top automakers with a 4.4 percent increase, the average estimate of six analysts surveyed by Bloomberg. Nissan Motor Co. may report a 5.2 percent decline and Ford Motor Co.’s light-vehicle deliveries may slide 4.3 percent, according to estimates.

The weak GDP growth indicates that the Federal Reserve will hold off raising rates until September, which will boost auto sales during the summer months, Szakaly said. Small wage increases could pressure vehicle selling, he said, citing a 1.5 percent to 2 percent boost as optimal.

“If that growth doesn’t happen, it does mean certainly some negative outlooks for the end of 2015 and then for the rest of 2016,” Szakaly said.

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