U.S. AUTO SALES SHRINK AS HIGH INTEREST RATES DISCOURAGE BUYERS
Sales of new cars and trucks fell 4.4% in August, unable to overcome high interest rates and a somewhat slower economy.
U.S. automobile sales rose at an annual rate of 15.1 million last month, down from about 15.8 million in July, according to Ward’s Intelligence. The figure reflects how many new vehicles would be sold in the entire year if the same number were purchased each month as were sold in August.
Part of the decline was expected after auto sales got a temporary boost in July. Sales in that month benefited by the recovery from a cyberattack that crippled auto-dealers’ computer systems across the country earlier in the summer.
Sales of new cars and trucks in the U.S. are still being depressed by high interest rates, however.
Oxford Economic estimates the purchase of a new car is about 12.5% of the median income of the typical family or individual buyer, not far from a record high. The cost of a new car has soared since the pandemic, along with auto insurance and repairs.
“The headwind to demand from stretched affordability remains a big constraint on sales,” said Oxford’s deputy chief economist, Michael Pearce.
Still, he pointed out that auto sales are relatively solid and indicate a stable U.S. economy.
The Federal Reserve is expected to embark on a series of reductions in U.S. interest rates starting at its next meeting in two weeks. Lower borrowing costs could give the economy a boost and encourage more customers to buy new cars.
Car purchases play a big role in retail sales and overall consumer spending, the main engine of the economy. Rising car sales tend to be an indicator of a strong economy.
The auto industry posted record sales of 17.5 million in 2016, but it hasn’t come close to that level in the past five years.