Auto sales suffer with U.S. housing woes

Reuters is reporting that U.S. auto sales are expected to have slipped about five per cent in August, hurt by a weakening housing market, higher gasoline prices and mushrooming consumer debt, but helped by incentive programs.
Analysts expect sales in August would have fallen further if the war on incentives had not heated up, and several forecasts expect sales for all of 2007 to fall to their lowest level in nine years.
U.S. auto sales, one of the leading indicators of consumer spending, began slowing in the second quarter and the knock-on effects of a weakening housing market and relatively high gas prices are widely expected to have capped demand in August.
“Early in August, sales were dismal. To generate showroom traffic, most automakers introduced incentives programs midway through the month,” said Jesse Toprak, executive director at industry research firm Edmunds.
“That effort was relatively successful, but the uncertainty in the housing market is likely to continue suppressing consumer demand for new vehicles for some time,” Toprak said.
When automakers report August sales on Tuesday, Sept. 4, Ford Motor Co. is expected to take the biggest hit in percentage terms, with sales for the second-largest automaker down as much as 16 percent.
General Motors’ August U.S. sales are expected to have fallen as much as 9.5 per cent, while Chrysler LLC’s sales could have slipped 14 per cent, analysts said.
“Housing price deflation — coupled with higher mortgage payments — and reports of volatility in the financial markets are weighing on consumers,” Bear Stearns analyst Peter Nesvold wrote in a research note.
Mike Jackson, chief executive of top U.S. car dealership chain AutoNation Inc., said the pressure on the U.S. economy is hurting auto sales. Calling on the Federal Reserve to cut interest rates, Jackson said the economy is in danger of slipping into a recession in the absence of a cut.