DETROIT -- Anticipating strong Memorial Day weekend action, some analysts predict the pace of U.S. light-vehicle retail sales in May will be the best so far this year.
Retail sales at dealerships will rise 6 percent for a seasonally adjusted annual selling rate of 13.6 million units in May, according to a joint forecast by LMC Automotive and J.D. Power and Associates. Adjusted for one additional selling day this month, the increase in retail sales would be 4 percent.
John Humphrey, head of Power’s global automotive practice, credited both “strong underlying demand” and a calendar quirk giving May five weekends this year compared with four a year ago.
Fleet sales are expected to be essentially flat but the total light-vehicle SAAR will hit 16.1 million in May, the third straight month of more than 16 million, said Jeff Schuster, LMC’s top forecaster. He expects overall industry sales in May of 1,547,000 units, compared with 1,443,000 in May 2013.
“Three consecutive months of solid growth has returned the market to the expected trend level on a year-to-date basis,” Schuster said. “As we move toward the second half of the year, the selling rates are expected to continue improving. But growth rates will begin to flatten out, increasing competitive pressures for all brands.”
TrueCar.com also forecasts the May SAAR at 16.1 million, with fleet volume down fractionally and retail sales driving volume this month.
Across the industry, TrueCar.com estimates May incentives at $2,677 per vehicle, less than 1 percent higher than a year ago, said Larry Dominique, executive vice president of TrueCar and president of its ALG subsidiary.
“The industry is back to the level we expected at the beginning of the year,” he said. “Chrysler, GM and Nissan are all benefitting from increased demand. They are able to pull back on incentive spending.”
Power estimates consumers will spend $37 billion on new vehicles this month, surpassing the previous high for the month of $34.3 billion set in May 2004.
“The record level of consumer spending reflects a combination of record transaction prices in May [of $29,600] and the strongest retail sales performance in May since 2004,” Humphrey said.
Wells Fargo analyst Richard Kwas sees a potential upside in May sales if automakers ratchet up holiday incentives. He forecasts a range of 16.1 million to 16.3 million in May’s sales rate.
“The high end of the range can be achieved if the anticipated sales strength for the Memorial Day weekend continues through the end of next week,” he said. “[Automakers] have begun to offer special holiday incentives.”
Slightly ahead of '13
In the first four months, U.S. auto sales totaled 5.1 million light vehicles, 3 percent higher than the year-earlier period.
Industry sales fell below projections in January and February when severe cold temperatures and record snowfall in many parts of the country discouraged consumers from shopping.
U.S. light-vehicle sales totaled 15.6 million units in 2013, 8 percent more than in 2012.