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US Vehicle Sales Should Remain Over 17 Million SAAR in August

Automakers will release August vehicle sales next Tuesday (September 1st) and currently, analysts expect sales (Seasonally Adjusted at Annualized Rate) to remain above 17 million.

 

Here are some forecasts from several specialists:

 

1/ Edmunds: Stock Market Fluctuations Don’t Slow August Car Sales, Says Edmunds.com

 

Edmunds.com, the premier destination for car shopping, forecasts that 1,538,958 new cars and trucks will be sold in the U.S. in August for an estimated Seasonally Adjusted Annual Rate (SAAR) of 17.4 million. The projected sales will be a 2.1 percent increase from July 2015, but a 2.8 percent decrease from August 2014.
 
“Sales momentum in August has been strong despite recent stock market fluctuations,” said Edmunds.com Senior Analyst Jessica Caldwell. “The fact that we will likely see a year-over-year decline in sales isn’t a troubling sign because last August was a monster month that included Labor Day weekend.”

 

2/ Wards: Forecast: LV SAAR Should Hold Steady in August

 

A new WardsAuto forecast calls for strong U.S. light-vehicle sales in August, extending a streak of light-vehicle SAARs that round to at least 17 million units. The report calls for automakers to sell 1.53 million LVs in the U.S. this month, for a daily sales rate of 58,866 units (over 26 days), a 0.7% improvement over same-month year-ago (27 days).

 

 

3/ Kelley Blue Book: New-Car Sales To Drop 4 Percent In August 2015, According To Kelley Blue Book

 

New-vehicle sales are expected to decline 4 percent year-over-year to a total of 1.52 million units in August 2015, resulting in an estimated 17.2 million seasonally adjusted annual rate (SAAR).
 
“While the outlook for August remains bright, we must keep an eye on the financial markets which have declined precipitously in the last few weeks on uncertainty in international markets, namely China,” said Alec Gutierrez, senior analyst for Kelley Blue Book.
 
“We remain confident that sales in August will remain robust; however, should the U.S. financial markets continue to falter, we could see demand for new cars soften in the short to medium term. It should be noted that the unemployment rate in the U.S. remains below 6 percent, while the auto finance environment remains as attractive as ever, so we don’t necessarily expect to see the sales pace deviate from its current 17 million-plus SAAR trajectory for 2015 unless the stock market continues its downward trajectory in the weeks and months to come.”

 

4/ J.D. Power and LMC Automotive: Industry Strength Continues in August, Full-Month Volume Impacted by Calendar

 

“On a year-over-year basis, August sales are going to appear weak, when in fact it’s really a variance in the numbers created by the calendar,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.“There certainly is no cause for alarm. In fact, the daily selling rate month-to-date in August is trending 8 percent higher than the same period a year ago, although we do anticipate the absence of the holiday in August sales will diminish that rate by the end of the month.
 
“Our expectation is that with Labor Day falling in September, sales that would have occurred this month are being pushed into next month. If that happens, September will move sales back to the strong trend line we’ve been seeing throughout the year.”

Investors Should Revise their Liftoff Expectations as FOMC Remains on Track to Raise Rates this Year

On Friday, San Francisco Fed President Williams (dove, FOMC voter) and Cleveland Fed President Mester (moderate, FOMC non-voter) both said they expect the FOMC to begin liftoff at some point later this year.

 

According to CNBC, San Francisco Federal Reserve President John Williams believes the U.S. central bank should raise rates twice this year if economic data meet expectations. In the meantime, according to WSJ, Federal Reserve Bank of Cleveland President Loretta Mester said raising rates right now wouldn’t be a problem for the economy as a whole.

 

These two statements confirm that most of FOMC members seem ready to raise rates this year. The fact is that the median dot plot for 2015 remained at 0.625% during the June FOMC meeting. It suggests that the committee expects at least two hike in 2015 despite that the World Bank joined the IMF in urging the Federal Reserve to hold off raising rates until 2016.

 

As suggested by the chart below, the gap between investors’ expectations and FOMC projections remains huge. But if data keeps on improving in coming weeks and Grexit is avoided, investors should revise upward their expectations concerning the pace with which the FOMC will tighten its policy.

 

 

 

FOMC Preview – A Summary from Bloomberg

Aberdeen (Luke Bartholomew)
- Fed will likely use June FOMC mtg to prep for Sept. rate hike and if 2015 and 2016 dots remain unchanged, “then we are full steam ahead for September”

 

AllianceBernstein (Joseph Carson)
- Fed officials would be “well advised to follow their script from the April FOMC statement and begin to lift official rates off the zero bound”
- “A policy that waits for economic data to supply the ‘truth’ will always be looking backward — and will always be systemically late”

 

Barclays (Michael Gapen)
- Improving economic data might allow Fed at this week’s FOMC mtg “to send a message of ‘not now, but soon’ in regard to the timing of policy rate firming”
- Stronger data may prove insufficient for June Fed rate hike, Sept. is most probable date for rate liftoff

 

BNP (Paul Mortimer-Lee)
- SEP and dot plot will likely have a more dovish tone while Fed’s policy statement and press conference may lean more hawkish, leading to an overall bearish message for June FOMC mtg
- Fed will likely show readiness to hike rates; broader message may support BNP’s view that Sept. is most probable month for the first rate hike

 

BofAML (Michael Hanson)
- Fed appears “quite unlikely” to hike in June, and possibility of Sept. rate hike will remain in focus for next week’s FOMC mtg given recent improvement in economic activity
- Fed officials may be “merely watching for reasons it might need to be dissuaded” to hike rates in Sept.

 

Capital Economics (Paul Ashworth)
- June FOMC statement may not have many changes, as “Fed will want to keep its options open,” although Fed may eventually tighten “much more aggressively than either Fed officials or the markets currently anticipate” due to rising wage growth and price inflation
- Slight downward revisions to 2015 GDP growth forecast would not be surprising; inflation, unemployment rate projections will likely be “largely unchanged”
- CapEcon views that Fed will likely begin hiking in Sept., although “a July rate hike is still a possibility”

 

Credit Agricole (David Keeble)
- Yellen can’t afford to sound “too dovish” at June FOMC mtg as employment data and its momentum may be “a poor excuse not to hike”
- CA recommends taking profit on shorts and heading back to neutral if Fed sounds more hawkish, since “any move higher in 2Y rates may be faded in the hours beyond any jump” given proximity to Eurogroup mtg

 

Credit Suisse (Dana Saporta)
“Modest” improvement in economy has likely not been sufficient to prompt Fed to tighten in June, with Sept. remaining most likely date for liftoff and July having a 15% probability
Fed may revise central tendency range for 2015 GDP down to 2.0%-2.4% at June FOMC mtg

 

Deutsche Bank (Joseph LaVorgna)
- Next week’s June FOMC statement will likely “acknowledge that the economy’s underlying momentum remains intact” and keep policymakers on track for Sept. liftoff
- Fed may mark down central tendency of 2015 real GDP growth to 1.7%-2.0% from earlier 2.3%-2.7%

 

Goldman Sachs (Chris Mischaikow)
- Speeches from Fed officials during intermeeting period suggest consensus view has shifted to reflect “that liftoff will likely be appropriate ‘at some point this year’” from a previously held view of 1st hike in mid-2015
- GS expects liftoff in Sept., although there is “a significant risk that hikes could be pushed back to December or later”

 

Jefferies (Ward McCarthy, Thomas Simons)
- FOMC’s median fed funds rate est. would be unchanged at 0.625%
- Avg. 2015 fed funds forecast may drop by 13bps

 

Morgan Stanley (Ellen Zentner)
- Sept. rate increase is “not off the table,” however, “we continue to believe enough uncertainty will linger over the outlook for growth and inflation that the Fed will choose to delay to Dec.”
- Fed statement seen saying economy “has failed to rebound strongly on the back of a very weak start to the year”

 

Renaissance Macro Research (Neil Dutta)
- Importance of this week’s FOMC mtg has largely faded after weak 1Q, although “recent improvement in the economic figures keeps a September rate hike in play”
- FOMC statement will likely point to improving economy

 

Standard Chartered (Thomas Costerg)
- June FOMC mtg may focus on “preparing the ground for a post-summer rate hike” as Sept. remains most likely date for liftoff
- Fed may lower longer-run growth estimates due to “persistently lacklustre productivity data”

 

TD (Eric Green)
- “Constructive” economic data since April mtg may lead to “more upbeat” tone at June FOMC mtg although 2015 economic growth projections will likely be revised lower
- Possible, although not probable, that median dot in 2015 would move down from 0.625% to 0.375%
- TD reaffirms view that Fed will start raising rates in Sept. as “the level of confidence is not yet sufficiently high to do so in June”; July mtg “is best viewed as a set up for higher rates” with follow through in Sept.

 

Source: Bloomberg

May US Auto Sales Should Rebound Significantly

Automakers will release May vehicle sales next Tuesday (June 2nd) and currently, analysts expect sales (Seasonally Adjusted at Annualized Rate) to rebound sharply from April. Because there was a full week of May after the Memorial Day weekend this year, shoppers had plenty of time to take advantage of the deals being widely communicated in dealer and automaker marketing messages.

 

Here are some forecasts from several specialists:

 

1/ Edmunds: Nearly 1.6 Million New Cars Sold in May Push Seasonally Adjusted Annual Rate (SAAR) to Impressive 17.4 Million, says Edmunds.com

 

Edmunds.com, the premier destination for car shopping, forecasts that 1,591,221 new cars and trucks will be sold in the U.S. in May for an estimated Seasonally Adjusted Annual Rate (SAAR) of 17.4 million. The projected sales will be a 9.6 percent increase from April 2015, and a 0.9 percent decrease from May 2014.

“The industry continued on its upward trajectory, helped by the timing of Memorial Day,” stated Edmunds.com Senior Analyst Jessica Caldwell. “Because there was a full week of May after the holiday weekend, shoppers had plenty of time to take advantage of the deals being widely communicated in dealer and automaker marketing messages.”

 

2/ JD Power-LMC Automotive: New-Vehicle Retail Sales SAAR in May to Hit 14.1M Units, Highest Level So Far in 2015

 

Total light-vehicle sales in May 2015 are projected to reach 1,591,100, a 3 percent increase on a selling day adjusted basis compared with May 2014.

The combination of strong sales and high transaction prices positions May to set a new record for the month for consumer spending on new vehicles at approximately $39.6 billion, according to the Power Information Network (PIN) from J.D. Power. It would become the third-highest level of new-vehicle consumer spending in a month following August 2014 ($40.3 billion) and July 2005 ($39.7 billion).

 

3/ Wards: Forecast: SAAR Could Reach 17.5 Million in May

 

A WardsAuto forecast calls for U.S. automakers to deliver 1.6 million light vehicles this month. The forecasted daily sales rate of 61,601 over 26 days represents a 3.9% improvement from like-2014 (27 days), while total volume for the month would be flat with year-ago. If deliveries meet or exceed WardsAuto’s forecast, May will be the 15th consecutive month to outpace prior-year comparisons.

 

4/ Kelley Blue Book: New-Car Sales to Reach 17.3 Million SAAR in May 2015

 

New-vehicle sales are expected to decline 1 percent year-over-year to a total of 1.59 million units in May 2015, resulting in an estimated 17.3 million seasonally adjusted annual rate (SAAR).

“May sales will reach the highest total year-to-date, and could remain the highest until December of this year,” said Alec Gutierrez, senior analyst for Kelley Blue Book. “While we expect an overall decline in volume versus last year, the difference is the result of one fewer sales day from May 2014, and total SAAR will reflect year-over-year improvement. May typically is a strong sales month, as consumers take advantage of warmer weather and advertised deals for the extended Memorial Day sales weekend.”

 

5/ TrueCar: TrueCar projects May retail auto sales to expand 2.4% following robust holiday weekend demand

 

“TrueCar, Inc. (NASDAQ: TRUE), the negotiation-free car buying and selling mobile marketplace, projects retail auto sales to consumers will rise 2.4% percent in May from a year ago, buoyed by strong Memorial Day weekend demand. Total volume may fall slightly on lower fleet deliveries, yet the retail uptick indicates sustained industry health.

New vehicle sales, including those to daily rental and commercial fleets, may dip 0.9 percent to 1,594,700 units this month from 1,608,693 a year ago. Deliveries may increase 2.9 percent on a daily selling rate (DSR) basis, adjusting for one less selling day compared to May 2014. Sales during the Memorial Day weekend, typically the peak buying period of the second quarter, were up 7 percent from a year ago, based on a TrueCar analysis. Automakers’ holiday promotions remain in effect through June 1, owing to an unusually early Memorial Day weekend this year.”