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Easier Credit Primes July U.S. Double-Digit Retail Sales Rise

8/1/2012
Retail sales in the U.S. auto market got off to a fast start in July. While they've slowed as the month has progressed, retail sales in the first 16 selling days are still up 15.1% from a year ago, and July could post the second-strongest retail sales growth rate for the year, according to a monthly sales update developed by J.D. Power's Power Information Network(R) (PIN) and LMC Automotive.* Fleet sales are expected to be slightly lower than in other months of the year.

Total light-vehicle sales (retail and fleet) remain stable, with volume in July expected to reach 1.168 million units, which is 20% higher than a year ago on a selling-day-adjusted basis.** That translates to a 14.1 million-unit seasonally adjusted selling rate (SAAR), which matches last month's SAAR and is significantly stronger than the 12.2 million unit pace in July 2011. Typically, July is a slower month for fleet deliveries, which so far account for 17% of the mix, but is still stronger than the historical July average fleet percentage of 15%.

Small and Midsize Car Segments Post Strong Gains
Growth has continued to build across most vehicle segments, as well as for many multi-franchise manufacturers. The major segments are expected to achieve year-over-year sales gains in July, with the exception of the midsize CUV segment. In particular, the Sub-Compact Conventional, Midsize Conventional and Compact Conventional segments are projected to experience year-over-year increases of at least 28%.

Our PIN real-time retail sales data finds that 30% of new-vehicle loans were 72 months or longer in July, which is up from 26.7% in July 2011. It's evident that long-term financing is a key driver in sales growth. Longer loan terms and the availability of credit are bringing consumers back into the market after being shut out since the recession began in 2008.

Conflicting Variables Could Impact U.S. Sales Forecast
The risk of further economic slowdown continues to mount as the U.S. labor market weakens, according to Jeff Schuster, LMC Automotive's senior vice president of forecasting. However, construction, which can be a leading indicator of recovery, is gaining traction. Given these conflicting variables and a sustained level of pent-up demand, our strategic partner, LMC Automotive, is retaining its 2012 forecast for light-vehicle sales at 14.5 million units, with retail sales set to reach 11.6 million units.

Since there has been an economic slowdown, Schuster also points out that there is an increasing likelihood that even with a second-half boost in auto sales, there are possibly 150,000 units at risk in the 2012 U.S. auto sales forecast.

*J.D. Power and Associates and LMC Automotive have a strategic alliance to share data and produce sales forecasts based on J.D. Power's real-time transaction data collected by PIN, with analysis and intelligence from LMC Automotive.

**The percentage of change is adjusted because there are 24 selling days in July 2012 vs. 26 days in July 2011.

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