Anemic August Automotive Sales May Be the Beginning of a Slump

While automotive sales for the month of August in the U.S. don’t look bad on paper – they’re up 2.4 percent overall compared to a year ago —  a number of experts are urging caution, and are even predicting a slump for the rest of the year. Year-to-date numbers are anemic: sales are up only 0.8 percent compared to this time last year.

There are a number of reasons for this prediction. For starters, it wasn’t hard to top August of 2017’s sales since much of the country was in the grip of a natural disaster, according to Forbes contributor Ed Garsten.

“For one, the comparison to last August is a bit of an anomaly since sales that month were severely depressed by the impact of Hurricane Harvey through southeast Texas, which includes Houston, the nation’s fourth largest city,” wrote Garsten.

In addition, the storms of 2017 likely boosted last year’s sales later in the year as people replaced damaged vehicles. Analysts at Evercore ISI said they expect domestic car sales to fall one percent year-on-year in 2018 “given tougher comps going forward.”

ISI analysts also cited the fact that “the threat of trade wars, tariffs and China weakness weighs heavily on investors’ minds.”

The sentiment was shared by analysts at Morgan Stanley, who believe that auto sales are “clearly on the downslope post peak.”

New hurricanes forming in the Atlantic Ocean this week may also push gas prices record highs for the year, which could also depress the auto buyer’s market. While so far the vehicle market has proved more resilient than many expected, experts say it can’t last forever.

“The market remains strong and all the talk of higher interest rates and trade tariffs is not chasing away buyers,” noted Charlie Chesbrough, senior economist at Cox Automotive. “However, we are still forecasting a slowing sales pace over the remaining months of the year as buying conditions slowly deteriorate due mostly to higher interest rates and continued high gasoline prices.”