U.S. auto sales remain robust despite rising fuel prices, looming budget cuts

U.S. auto sales in February remain strong despite rising fuel prices and the threat of fresh government spending cuts, several forecasters and analysts say.

LMC Automotive, the forecasting partner of J.D. Power and Associates, today projected a seasonally adjusted annualized sales rate of 15.2 million for February, based on the first 14 days of the month.

Citing an improving U.S. economy, LMC also raised its estimate for the full year by 200,000 units to 15.3 million light vehicles.

U.S. sales grew 13 percent last year to 14.5 million units, as the industry continued its comeback from the recession low of 10.4 million recorded in 2009.

"Current fundamentals driving strong vehicles sales … are expected to get a boost by additional positive factors this year," said Jeff Schuster, the company's top auto forecaster, citing an anticipated housing recovery, more new-model launches and a higher number of vehicles coming off lease.

Automakers plan to release February sales results on March 1.

John Humphrey, senior vice president of global automotive practice at Power, said the auto industry is healthy.

"Average transaction prices are up, incentives are stable, leasing is at a healthy level and newly designed models continue to make an impact on the marketplace," he said in a statement.

Edmunds.com estimates February volume at 15.5 million on a seasonally adjusted annualized sales rate basis.

"Car sales are persevering despite economic factors on people's minds like rising gas prices and the implementation of the payroll tax," said Edmunds analyst Jessica Caldwell in a statement, citing pent-up demand and available credit as positive factors.

It would be the fourth straight month with a sales pace above 15 million, the first such streak for the industry in five years.

LMC Automotive expects the February retail SAAR to be 12.1 million, down from January's brisk 13.1 million rate but up from 11.7 million last February.

Richard Kwas, an analyst with Wells Fargo, said today the SAAR is expected to reach 15.1 million to 15.2 million, and could climb higher, in February.

"A number of [automakers] have introduced new incentive programs through the end of the month post the expiration of President's Day spiff programs," Kwas said in a research report today. "[Higher] North American production ... is possible if the SAAR begins to trend in the mid-15 million range beginning in the spring."

Auto sales -- an ongoing strength in the U.S. economy -- have largely defied other developments that have led to a choppy recovery and prompted some consumers to cut back spending in recent months.

U.S. gasoline prices averaged $3.75 a gallon this week, up 52 cents so far this year and 16 cents higher than a year ago, the U.S. Energy Information Administration said.

On Jan. 1, payroll taxes rose 2 percent after a two-year holiday lapsed.

And Congress is deadlocked on legislation to avert large government spending cuts. Unless a deal is reached by Thursday, the federal government must implement deep spending reductions in defense and social programs starting March 1.