Vehicle Sales Remain Solid

The trend in new vehicle sales will rise at a solid, but not overwhelming rate. For moldmakers that supply the auto industry, this all should come as welcome news. Business from the auto industry has been very strong during the past year, and at times it even appeared to be too much of a good thing.

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In July, the seasonally adjusted total for new light vehicle sales was 14.1 million units annualized. This was modest decline from the 14.3 million units sold in June, but it was 14% stronger than the 12.4 million units that were registered in July, 2011. The new vehicle sales data has hovered near the 14 million units level for most of this year. We expect the trend in vehicle sales to be steady-to-better for the remainder of the year, and the annual total should be very close to 14.5 million units for the whole year in 2012. This is a 15% increase when compared with the annual total from last year.

This forecast is based on several well-developed trends that will continue to support vehicle sales despite the sluggish rate of growth in the overall economy. These include: gradually improving credit conditions; the introduction of several new models; and most importantly, the advanced average age of vehicles currently in operation. The average age of cars and light trucks on the road in the U.S. is just under 11 years.

Due to the uncertainty about the health of the overall economy in the past four years, many consumers have postponed the purchase of a new car for much longer than they typically would have if the recovery was more robust. But as long as the prevailing economic conditions continue to improve—and our forecast calls for gradual improvement during the next 12 months—then the trend in new vehicle sales will rise at a solid, but not overwhelming rate.

For moldmakers that supply the auto industry, this all should come as welcome news. Business from the auto industry has been very strong during the past year, and at times it even appeared to be too much of a good thing. If the demand from the auto makers were to start growing at a more rapid pace, it is doubtful that the North American moldmaking industry could ramp up fast enough to meet the demand. So a gradual, but steady rate of growth is probably best in the near term.

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