U.S. auto sales below expectations in August, likely to rebound in Q4

U.S. auto sales dropped in August, coming in at 16 million units. This marks the weakest pace of sales since early-2014. Consensus expectations were for 16.6 million units. Only Toyota and GM recorded gains amongst the top selling brands in August. Nissan, Hyundai and FCA registered sharp declines, while, Honda, Ford and Kia recorded modest drops in the 2 percent to 3 percent range.

Passenger cars continue to be the weak link, falling 8 percent year-on-year in August, whereas light trucks managed to grow 3 percent year-on-year. Light trucks contributed almost two0thirds to the total sales in the month.

It would seem that Hurricane Harvey impacted auto sales in August as many cities and towns in southeast Texas were paralyzed and dealing with huge flooding that shut down dealerships and other places of business. The effect was more pronounced as Texas relies heavily on vehicles, with ownership rates in the state above the national average.

While Harvey led to unimaginable devastation, it has moved away, implying that the decline in the auto sales would be greatly felt in the August and September figures. Industry experts anticipate that 20-40 thousand sales, or 240-480 thousand after annualizing, were delayed because of the storm. Moreover, hundreds of thousands of vehicles have been damaged by the severe flooding.

Sales are expected to remain weak until some calm is restored in the affected areas, noted TD Economics in a research report.

“However, sales should begin to rebound heading into the fourth quarter, setting the stage for a strong performance from the auto industry at the end of 2017 and into early-2018. This will bode well for consumer spending and overall economic growth in the coming quarters”, added TD Economics.

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