Sales of new trucks are likely to continue leading the auto industry’s recovery from the pandemic in 2021.

Despite the continuing pain from the pandemic, signs point to a solid rebound in sales and production of new vehicles in 2021 and 2022, according to economists from the University of Michigan.

Economists presenting at U-M’s 68th annual economic outlook conference, which is closely watched by automakers, noted this week the recovery in the sales from the slump created by the pandemic earlier this year through the late summer and fall have created the momentum to continue the upturn in 2021 and beyond.

Daniil Manaenkov, a U.S. forecasting specialist who was part of the panel that presented the forecast during the annual conference, said outlook is for new vehicle sales to climb to 16.3 million unit in 2021, up from the final estimate of 14.5 million in 2020 after a strong finish.

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The outlook calls for sales to continue to climb to 16.7 million units in 2022.

New vehicle buyers will continue buying online as part of the ongoing rebound in 2021.

While GDP is expected to drop 3.6% in 2020 despite the partial rebound in the last half of the year, the real GDP returns to pre-pandemic levels only in the second half of 2021 grows by 4.2% gain in 2021 as the economy rebounds from the recession that followed COVID-19 pandemic, according to the U-M’s predictions.

However, COVID-19 remains a significant risk in calculating the outlook for 2021, according to the U-M economists, as the U.S. waits for the distribution of a vaccine that can minimize the threat from virus.

In the auto industry, for example, the pandemic still threatens the supply chain that feeds assembly plants in the United States. Problems with the COVID-19 outbreaks in Mexico, where the death toll from the pandemic passed 100,000 last week, have already led companies like General Motors to cancel shifts and curtail overtime, noted Kristin Dzieczek, vice president of Center for Automotive Research.,

Car buyers, however, tend to be over 50 and financially secure with incomes of more than $75,000, she added, which has helped in stabilizing the outlook for the industry.

Low interest rates also are expected to continue for the foreseeable future, noted Louise Sheiner, an economist with The Brookings Institution. The heavy borrowing by the federal government is not expected to crowd out the

New car sales are expected to rise for the next two years, hitting pre-pandemic levels.

borrowing needed to sustain private investment. “Clearly we have much more space for borrowing than we thought,” she said, which will help keep interest rates low.

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Another factor that should help give the car industry a boost is the boom in housing starts.

David Berson, chief economist for Nationwide Insurance, noted that housing starts in 2020 are at the highest level since 2006 during the housing boom that preceded the Great Recession. Historically, there has been a strong correlation between housing starts and sales of light-duty pickup trucks, which have boomed this year despite declines oil-gas industry, farming and ranching.

The boom in housing starts is likely to continue, said Berson. While underwriters have tightened up their requirements, making mortgages tougher to get, the demand is extraordinarily strong, he said. Surveys among home builders indicate that there is a steady stream of buyers looking at new homes.

“There is a desire for space,” he said. “Builder confidence is really high.”

Housing starts are rising, which generally translates to strong new vehicle sales.

On the other hand, the pandemic has had a major impact on the travel industry, which is down 72% this year leading to major unemployment across the sector, according Robert Arnold of the Congressional Budget Office.

A number of the panelists who spoke during the two-day conference cautioned that political infighting and rancor continues to rise in the United States, and is closing in on the point where it poses a threat to the economy for the long term and could easily lower the U.S. growth rate, leaving the U.S. poorer for a decade.

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Manaenkov said in the short term the economy will require government assistance and the U-M forecast that divided government in Washington D.C. will manage to produce a stimulus package since the need aid is self-evident. Longer term, however, the outlook for compromise is less certain, he added.

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