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July's secret sauce? 'Nothing bad happening'

Why did auto sales flourish in July? “Nothing bad happening,” which as it happens, is my favorite explanation this month.

July’s seasonally adjusted annualized selling rate hit 17.55 million, a bit higher than forecasters had expected. After so many good sales months, why that happened is the real news.

At first, I was tempted to chuckle when AlixPartners’ Mark Wakefield said “there’s nothing really special about July except there’s really nothing bad happening” to explain why sales beat expectations.

But on reflection, Wakefield nailed it. That’s exactly why sales slightly overachieved.

It’s no surprise that auto sales are on a roll.



Monthly deliveries have beaten the year before 66 of the last 70 months. Yeah, yeah, we’ve all heard that “sales are up.”

If this was a three-week, see-America road trip with the family, consider this day 19: pounding down I-80 through mid-Nebraska, retracing our outbound route and talking inanely to keep the driver awake. “Boy, sure making good time today, eh?” “Umm.”

Great vacation memories but hey, we’ve been this way before. We already saw historic Fort Kearney. We know the Platte River is “a mile wide and an inch deep.” More interesting is when we stop for dinner.

But to Wakefield’s point, our auto trip really did make good time today. No tourist traps, quick pit stops and no construction detours. See? Nothing bad happened.

That’s how July auto sales went, too. No geopolitical crisis, no financial panic, no market crash. Nothing to spook would-be new-vehicle buyers. Nothing to distract from the reassuring positive buzz of background info.

As Wakefield notes, consumers are quick to delay auto purchases after bad news, “but it takes time to feel the time is right to buy a car.”

So without alarm bells clanging, buyers can focus on positives like the strong U.S. economy, job growth, steady credit, low auto loan rates and very attractive new vehicles loaded with new technology.

“Consumers are seeing a plethora of deals competing for their business,” Wakefield said today.

Larry Dominique, president of ALG, adds that pent-up demand is stilling driving auto sales six years into recovery.

“We see pent-up demand as a positive factor until mid-2016,” he said today.

And Dominique agrees that the absence of bad news is helping auto sales.

“When consumers feel good, they’re more willing to look at buying,” he said. “Automakers did nothing out of the ordinary to push demand in July, so consumers must feel good.”

You can reach Jesse Snyder at jsnyder@crain.com -- Follow Jesse on Twitter: https://twitter.com/spartyjesse

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