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February New Vehicle Sales Expected to Drop

Drop comes after better-than-expected January.

by on Feb.21, 2019

New vehicle sales are expected to fall 2.2% compared with last February's results.

With cold weather gripping the nation’s midsection, sales of new vehicles are expected to drop significantly in February, according to analysts and signals from the Federal Reserve Board.

Edmunds predicts that 1,271,009 new vehicles will be sold in the U.S. in February for an estimated seasonally adjusted annual rate or SAAR of 16.7 million. This reflects a 12.3% increase in sales from January 2019 and a 2.2% decrease from February 2018.

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“Although the drop off in sales is rather subtle year over year, February is shaping up to be a good barometer of the gradual sales decline we expect through 2019,” said Jeremy Acevedo, Edmunds’ manager of industry analysis.

“We’re really starting to see a slump in retail demand that stems from the growing costs of new car purchases,” he said.

(Auto loan delinquency rate higher than Great Recession. Click Here for the story.)

The February SAAR also is in line with the drop in sales predicted by the prevailing sales forecast for 2019 from various automakers and analysts.

Analysts also noted this week that predictions are becoming more difficult because both Ford Motor Co. and General Motors have stopped releasing monthly sales data.

After a stronger-than-expected January, analysts expect February sales to fall.

Edmunds analysts note that although Presidents Day marked the first auto sales event of the year, the weekend’s sales did not see a significant lift compared to the rest of the month. They also note that the slower sales pace in February indicates that there were few sales recuperated from either the extreme weather conditions or the government shutdown last month.

Every major automaker, GM, Ford, Fiat Chrysler, Toyota, Honda and Nissan as well as Volkswagen are expected to report a drop in sales when February sales totaled, according to Edmunds.

One manufacturer that is expected to see a sales improvement, which is expected to grow with 1.5 points of market share.

“It’s easy to point fingers at anomalous factors like the polar vortex as the reason for a sales slowdown, but the numbers don’t show that’s the case,” said Acevedo. “Record-high interest rates and rising average transaction prices are what’s really putting pressure on the market and keeping car shoppers at bay so far in 2019,” said Acevedo.

(Click Here for more about analysts forecasting strong 2019 auto sales.)

The Federal Reserve Bank of New York reported that more Americans have fallen behind by three months or more on their car payments than during the Great Recession of 2007–2009.

Meanwhile, U.S. factory production unexpectedly contracted in January, shrinking the most in eight months on weakness in the automotive sector as headwinds including a trade war with China weighed on factories.

All signs point to a disappointing February for new car dealers in the U.S.

Manufacturing output fell 0.9% after a downwardly revised 0.8% increase in the prior month, according to data released last week by the Federal Reserve.

The decline was driven by an 8.8% decline in motor vehicles and parts, with assemblies falling from the best pace in more than two years to the weakest reading since May.

Most industries were little changed while information processing, construction supplies and defense equipment posted losses.

The data point to cooling across the manufacturing sector, consistent with analyst forecasts for a broader moderation in the U.S. economy this year, Bloomberg noted.  The indexes are likely to continue to decline for February and March since companies such as GM, Ford and Nissan have announced plans to reduce production in the weeks ahead.

The trade war with China also is putting some investment on hold and raising costs for factories, potentially overshadowing wage gains and a strong labor market.

(Auto sales stabilize in January despite polar weather. Click Here for the story.)

In addition, consumer sentiment, which influences the purchase of new vehicles, has been slipping in recent months even stock indexes have improved after a sharp downturn last autumn.

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