Auto forecast softer, yet optimism remains

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This is no time to panic.

It was sobering when an analyst at the Management Briefing Seminars in Traverse City, Mich., softened his forecast of U.S. auto sales for this year and 2013 — a contrast to the happy-days-are-here-again exuberance in some corners of the industry during the first seven months of the year.

The auto industry has been one of the country’s few economic bright spots. Dealerships are selling cars. Automakers and suppliers are buying steel and other raw materials and parts, and they have been hiring.

But a softened forecast shouldn’t come as a shock. Industry sales in July amounted to a seasonally adjusted annualized selling rate of 14.1 million new light vehicles, much better than a year earlier but off slightly from the June rate of 14.3 million.

Most analysts still think that 14 million to 14.4 million is the likely range for sales this year.

Even so, consumer confidence slipped in July, according to the Thomson Reuters/University of Michigan survey of consumer attitudes. The unemployment rate remains above 8 percent, and tucked in the most recent employment report from the Bureau of Labor Statistics, along with the good news that private-sector jobs are being created, were household data showing 195,000 fewer people with jobs in July than in June.

Over the lingering U.S. economic sluggishness sits a cloud of global economic uncertainty caused in part by massive debt crises in Europe and questions about the sustainability of economic growth in China.

But things will get back on track and probably sooner rather than later.

Cited as positive factors by analysts last week:

* Economic growth is projected to reach 3 percent next year, up from 2 percent this year.

* Housing prices appear to have hit bottom.

* U.S. household debt is under 11 percent of income, down from more than 14 percent in late 2007, according to Federal Reserve Board data.

* There is still pent-up demand to replace old cars.

One forecaster, Ford Motor Co. chief economist Ellen Hughes-Cromwick, said an improvement in housing starts could begin driving sales gains as soon as next year and could push volume to near 17 million units by the end of the decade.

Clearly, for car sales to get back to pre-recession levels, the recovery must grow in segments other than the auto industry. When real jobs are created in sufficient numbers, more Americans will buy cars.

Ultimately, the market must pick up. In the meantime, wise companies will continue to invest in people and technology.

This column was originally published in the Aug. 13 edition of Automotive News, a sister publication to Plastics News.