Forecasters see U.S. sales up this year, but softer 2017

DETROIT -- Full employment and credit availability are among the economic factors that will help U.S. new-vehicle sales cruise to a new record in 2016, analysts agree.

But two forecasters said sales will peak this year and ease in 2017. Moreover, “there is an unhealthy disregard for the downside risks” this year, Tom Webb, Cox Automotive’s chief economist, warned Sunday at a briefing put on by Cox ahead of the Detroit auto show.

Alec Gutierrez, senior analyst at Kelley Blue Book, predicted 2016 U.S. light-vehicle sales at between 17.5 million and 18 million units. Cox Automotive owns Kelley Blue Book, Autotrader and auction giant Manheim.

But Gutierrez also implied that if his forecast proves wrong, he thinks it’s more likely sales will fall short of that range than exceed it. And for 2017, he predicted a sales range of 17.3 million to 17.9 million.

NADA: 17.7 million

Separately, Steven Szakaly, chief economist of the National Automobile Dealers Association, predicts that sales of new vehicles in 2016 will reach 17.7 million, about a 2 percent increase from 2015’s record 17.5 million, but sees them slipping after that.

Szakaly predicts that automakers will increase their use of incentives this year to manage increased manufacturing capacity and to offset the effects of a slowing global economy, especially in emerging markets.

“We are living peak auto sales right now, and we will see one more year of that growth in 2016,” Szakaly said in a statement.

“But only because of rising incentives that will keep consumers coming into showrooms,” he said. “The real worry now is whether we’re starting to pull sales ahead from future years.”

Webb’s worries

Webb said the auto industry is better positioned than other segments of the economy. But he said there are headwinds that could get in the way of the growth it has enjoyed over the last few years.

For example, he noted, the U.S. economy has returned to full employment but the labor market is far from “robust.”

“We have reached full employment, but we do not have robust employment,” he said. “Labor-rate participation is at a four-year low, wage growth has been mediocre, labor productivity has been dismal and there are a lot of people out there employed part-time that would like to be employed full time.”

Webb also cited concerns about “global recession, exchange rate movements [and] market volatility,” all of which are “caused by things outside of the auto industry.”

Used-car implications

Gutierrez cautioned that an abundance of off-lease vehicles returning to dealership lots in the form of certified used vehicles might put some pressure on new-vehicle sales.

Webb said about 3.1 million off-lease vehicles are expected to return to the market in 2016, up from almost 2.6 million in 2015. That pool of vehicles is expected to grow to almost 3.6 million in 2017 and almost 4 million in 2018.

Gutierrez also cited Kelley Blue Book data that showed a steady increase in incentive spending as a percentage of average transaction prices, to a forecast 9.1 percent in 2016 and 9.4 percent in 2017, from 8.8 percent in 2015. “We’re getting close to the level where discipline begins to wane,” he said.

“Though we’re optimist about 2016,” Gutierrez said, “we can’t discount the downside risks.”