Consumer Confidence Drops as Do February Car Sales
By Michelle Krebs March 2, 2009Americans' confidence in the U.S. economy fell in February, and it showed with a lack of activity in dealer showrooms last month. Automakers report February sales Tuesday, and the annualized rate is likely to be the lowest since the early 1980s.
A key indicator that drives car sales is consumer confidence, which had been edging up since last fall but fell back in February.
The Reuters/University of Michigan final index of consumer sentiment, reported on Friday, showed a drop for the first time in three months to 56.3 from 61.2 in January. The gauge reached a 28-year low of 55.3 in November.
The Conference Board's earlier consumer confidence measurement showed a drop to the lowest level in its 42 years of recordkeeping.
The culprits blamed for the decline are the loss of 3.6 million jobs across the country and the erosion of households' net worth. As a result, consumers are steering clear of dealer showrooms as they cut spending. The Seasonally Adjusted Annualized Rate (SAAR) for February vehicle sales is likely to come in at about 9.5 million vehicle sales, according to an average estimate of 27 analysts and economists surveyed by Bloomberg News.
Included in that average is Edmunds.com's forecast of 9.3 million SAAR, particularly low considering when the SAAR was last that low in the early 1980s, the U.S. had 25 percent fewer licensed drivers. Edmunds.com, parent of AutoObserver.com, forecasts February sales will total 685,000 vehicles a 41 percent drop from last February but a 5 percent increase from January. This February will mark the 15th consecutive month of sales declines for the U.S. auto market.
Ford's top sales analyst George Pipas said the rate could decline to as low as 9 million. "We don't know where the bottom is," Pipas told reporters Friday. He said Ford's retail sales rate, which has been rising in recent months and was at a high-water mark last February, will show a decline for this February.
One analyst told Bloomberg with the kind of sales being posted by automakers, it's difficult to see how General Motors or any automaker can cut enough cost in the next year or so to be viable.
Pipas said Ford expects the industry sales rate in the second quarter to improve to 10.3 million, closer to the level of the final quarter of 2008.
Vehicle sales in the U.S. closed 2008 at 13.2 million last year, the lowest level since 1992.
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