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ecember 2014

9

T

he National Automobile Dealers Association forecasts

16.94 million new cars and light trucks will be purchased

or leased in the United States in 2015.

“Rising employment and wages, continued low interest rates

and lower gasoline prices all signal an increase in new light-

vehicle sales in 2015,” said NADA Chief Economist Steven

Szakaly. “The economy will continue to build on the solid

growth established in 2014, and we also expect the fundamen-

tal conditions to improve in the year ahead. Gross domestic

product will grow at 3.1 percent in 2015, with the potential for

growth to exceed our forecast.”

Szakaly added that new-car sales rising above 17 million

units in 2015 would require a ramp up in incentives and an in-

crease in new-car purchases by millennial shoppers above what

has occurred over the past two years.

With nearly seven weeks remaining this year, NADA’s

original sales forecast of 16.4 million new-cars and light-trucks

for 2014 remains on target with an expected healthy finish in

sales in November and December. GDP will grow at 2.1 per-

cent in 2014, with inflation remaining well tamed as the year

ends, Szakaly said.

Employment & Wages

Employment will continue to increase. “Growth is now well

above 200,000 jobs per month, and our forecast for employ-

ment growth is 242,000 new jobs on average per month in

2015,” Szakaly said. “This improvement in the labor market

should also benefit wages and incomes. This growth will be

moderate, with disposable income rising by 2.5 percent in

2015. Conversely, corporate profits are expected to increase by

a healthy rate of 6.7 percent.”

Interest Rates & The Federal Reserve

NADA’s 2015 forecast, in part, is predicated on interest

rates remaining low, Szakaly added. “The Federal Reserve is

expected to raise interest rates in 2015, but the rate rise will be

small,” he said. “The Fed policy rate will move to 1 percent by

October 2015, with further movements in rates expected during

the second half of 2016.”

In addition, NADA expects long-term rates on auto loans to

rise in 2015, though not sufficiently to dampen its sales out-

look. NADA expects rates on auto loans to rise by about 125 to

150 basis points by Dec. 31, 2015. This rise will be steady over

the course of the year.

Inflation

While talk of wage increases often leads to discussions about

the possibility of inflation, Szakaly said there are other factors

that will

counter any

effect from

rising wages.

For example,

“declining

demand from

emerging markets

for commodities and

raw materials, especially China, will

ease pressure on prices for U.S. companies,” he said.

“In addition, a stronger U.S. dollar will further dampen

inflationary pressure by maintaining downward momentum

on import prices for goods and services.”

Gasoline Prices

Oil and gasoline prices are expected to remain weak through

2015 because of the recent market share war that began in

Saudi Arabia, Szakaly said. NADA’s current forecast is for

West Texas Intermediate (WTI) crude to average $71 - $73 per

barrel in the first half of 2015, rising to an average of $83 for

the second half of 2015.

“Lower oil prices, which translate into lower prices at the gas

pump for consumers, increases household spending on other

goods and services, resulting in higher growth,” he said. “If oil

and gasoline prices remain low through 2015, we could easily

see consumers return in even greater numbers to the light-vehi-

cle market during the second half of 2015.”

Forecast Risks

Szakaly cautioned there are a few global macroeconomic

concerns to the GDP forecast in the United States, such as

conditions in China and Europe, but they will not likely derail

U.S. economic growth.

In particular, growth in China will slow to an average GDP

rate of 6.4 percent in 2015 and 5.9 percent in 2016. “This has

the potential to harm U.S. exports and hurt profits at compa-

nies that are dependent on the market in China,” he said.

In addition, growth in the Eurozone is expected to be weak

with GDP likely to grow at only 1.4 percent in 2015. “This

may further dampen demand for U.S. goods and services,”

Szakaly said.

In the United States, rising interest rates could cause a

slowdown in the housing market. “In particular, existing

home sales are expected to remain sensitive to interest rate

rises, more so than new vehicles, and could easily dampen

activity in new-home construction and reduce sales of light

trucks,” he added.

NADA Expects Increase

In 2015 Vehicle Sales