The U.S. Auto Industry Predicts a Rosy, Yet Cautious, 2015

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While automotive production has been driving the economic recovery for five years, carmakers long have been watching warily for when the current boom will begin easing off or ending. The latest manufacturing data suggests that this may already be occurring.

In November, respondents to Chief Executive magazine’s CEO Confidence Index survey registered a 6.2% increase in confidence over October when asked how they felt business conditions would be over the next 12 months. In addition, the most recent report on U.S. GDP showed a healthy 4.3% rate of expansion in the third quarter.

“NADA predicts 16.94M new cars and light trucks being purchased or leased in 2015, up from 16.4M in 2014.”

Yet, “While the solid outlook for the U.S. economy remains, there are mounting downside risks to growth this quarter,” Harm Bandholz, chief U.S. economist at UniCredit Research in New York, told Reuters. For instance, consumer spending fell in September, for the first time in eight months (down 0.2%).

Not all sectors are measuring the same level of confidence, however. While automotive production has been driving the economic recovery for five years, carmakers long have been watching warily for when the current boom will begin easing off or ending. The latest manufacturing data suggests that this may already be occurring, as a 1.2% fall in U.S. motor-vehicle production restrained overall American manufacturing output in October.

There also is growing dislocation in the auto industry prompted by the continuing decline in the price of gasoline. While overall, of course, the drop in gasoline prices to less than $3 a gallon is good for the economy and for car sales, it’s already beginning to force automakers to adjust the makeup of their output. General Motors, for instance, just moved to trim production of some of its fuel-sipping smallest cars, in Michigan, while IHS Automotive recently raised its 2015 production forecast for GM’s gas-thirsty full-sized pickups by 6% over previous estimates.

Still, the National Automobile Dealers Association recently joined other forecasters in predicting continued rosy times for U.S. auto sales in 2015. NADA pegged its prediction at 16.94 million new cars and light trucks being purchased or leased in 2015, up from its current 2014 forecast of 16.4 million units.

“Rising employment and wages, continued low interest rates and lower gasoline prices all signal an increase in new light-vehicle sales in 2015,” NADA Chief Economist Steven Szakaly said.

“The economy will continue to build on the solid growth established in 2014, and we also expect the fundamental conditions to improve in the year ahead. Gross domestic product will grow at 3.15 in 2015 [compared with a predicted rate of 2.1% for all of 2014], with the potential for growth to exceed our forecast.”