What’s my favorite part of January U.S. auto sales?
No big spike in demand. No calamitous drop in the month after the hottest December sales ever and back-to-back record years.
January closed with 1,142,568 light vehicles sold, dutifully noted as 1.9 percent lower than last January. The seasonally adjusted, annualized selling rate was 17.57 million, compared with 17.62 a year earlier. Yes, we needed two decimals to detect the difference.
It’s a month that leaves us all straining gnats to define. Toyota Division General Manager Bill Fay, normally colorful, said the overall market “took a bit of a pause.”
If so, the pause was tiny. Last January’s SAAR was buoyed by unseasonably good weather and a tad stronger than the full-year record of 17.54 million, making it a tough comparison. Extend this January’s SAAR over the next 11 months and we’d set a third straight record.
But it’s just January, traditionally the year’s slowest sales period and about 6 percent of annual volume.
Starting a new year with no apparent change in direction is good news. Pretty much all of last year, the expectations for 2017 called mostly for a modest decline, an inevitable slide off the peak after a long expansion. The consensus 2017 units sales forecast of analysts compiled by Bloomberg in November was 17.3 million, or roughly a quarter million units lower.
Suddenly, that anticipated slide is not so automatic. Citing a bump in consumer sentiment and higher fleet volume, Jeff Schuster of LMC Automotive now forecasts 0.1 percent growth this year.
And President Donald Trump’s surprise election has perked markets. “Let’s say that Trump passes all of his tax cuts and all of his infrastructure spending,” said Steven Szakaly, chief economist for the National Automobile Dealers Association. “That is going to be a big boost.”
So the dynamics of the U.S. auto market in 2017 remain fairly balanced.
On the downside, incentives are quite high, 22 percent higher in January from a year earlier and a worrisome 11 percent of actual transaction prices, said Eric Lyman of ALG. Rising lease returns and plentiful supply of late-model used cars are pushing down used car prices. Interest rates are starting to creep a bit higher.
But the economic fundamentals most closely tied to new-car sales remain strong. The general economy is strong. Job growth is solid. Housing is OK. And since the election, U.S. financial markets have hit new highs and consumer confidence has jumped, though it dipped slightly in January.
But in a balanced market place, let’s bottom line 2017:
Automakers have the power, using incentives, to move the market into either growth mode or a contraction in 2017, but so far have maintained discipline. That resolve has already materially extended the U.S. auto sales expansion to an abnormally long seven years.
Automakers’ decisions in recent years have been rational and controlled. But their combined powers to manage the marketplace pale by comparison to those of the Trump administration. Trump is a huge unknown.
In the meantime, sales volume continues at a remarkable 17 million pace. There is potential for more growth and even more potential for decline. However it turns out, this will be a nervous year.