SAN FRANCISCO — U.S. sales of new cars and light trucks will fall about 2.5 percent this year to 15.7 million vehicles, NADA predicts.

The projection would have been even lower if the Federal Reserve Board had not cut interest rates twice in January, Paul Taylor, NADA's chief economist, said here.

New light-vehicle sales have not dropped below 16 million units since 1998. Last year, sales were nearly 16.2 million units.

Taylor offered the association's sales update and economic outlook at the convention.

In an interview, Taylor said he does not expect dealer profitability to increase much, if at all, this year.

In the first 11 months of 2007, the average U.S. dealership made a net pretax profit of 1.7 percent of total sales. A full-year figure is not available.

Taylor said he does not think the U.S. economy will slip into recession. He said it will improve in the second half of 2008. Interest-rate cuts and the stimulus package approved by Congress will help offset the effects of high energy costs and slumping real-estate markets, Taylor said.

But he noted that in the past two years, dealers had average net losses on sales of new vehicles, including finance and insurance income. "This industry has gone through two difficult years," Taylor said. "We've already been in the correction process."

Despite the credit crunch caused by the subprime housing mess, Taylor said, auto dealers and consumers "are not yet facing any obstacles in finance that are abnormal."

In his forecast, Taylor also said:

-- The number of franchised U.S. dealerships, now more than 20,000, is likely to drop to about 15,000 stores within a decade, as the Detroit 3 and other automakers pursue aggressive retail consolidation plans.

-- Sales of used cars and trucks at franchised dealerships fell to 11.4 million units from 11.5 million in 2006. Used vehicles yielded an average retail net profit of between $250 and $270 last year.

-- Sales of new crossover vehicles rose by 17.8 percent last year — the only segment that showed appreciable growth. Crossovers are likely to remain "a source of strength" in 2008.

-- Within five years, Chinese and Indian brands are likely to have substantial U.S. franchise networks.