The seasonally adjusted annualized rate for total motor vehicle sales in September was 17.4 million units, according to Autodata Corp. This was a solid gain when compared with the previous two months, and it was the best month so far this year. Despite this solid gain, the total for September was still 4 percent below the total from the same month a year ago.
That's because, for the second straight year, the September sales figures got a boost from post-hurricane replacement sales. Last year, Hurricane Harvey devastated the Houston area and destroyed a lot of vehicles in the process. This year, it was Hurricane Florence hitting the Carolinas that caused the damage. The larger size of the storm last year, combined with the greater population density of the area affected, resulted in more cars destroyed in Harvey than in Florence. Thus, the impact to the monthly sales data this year was smaller.
Looking past the hurricane effects, the total sales data has gradually trended downward this year, and I expect this to continue through 2019. In the coming quarters, demand for motor vehicles will get support from a tight labor market, rising wage growth and high levels of consumer confidence.
In opposition to these forces, demand will be restrained by rising interest rates, higher fuel prices, higher prices for new vehicles and some tightening of lending standards corresponding to the gradual rise in delinquency rates. The forecast calls for total sales to decline by 2 percent in 2018 to a total of 17 million units, and then another 5 percent in 2019 to a total of 16.2 million units.
A more important statistic to both domestic molders of plastics parts and the mold makers who supply them is the number of motor vehicles and parts that are manufactured in the U.S. The recently negotiated trade deal with Mexico and Canada changes the "country of origin" rules by raising the percentage of domestically produced parts in a car to 75 percent in order to obtain duty-free status.
President Donald Trump touts this as a way to increase jobs and investment in the U.S. auto industry, and in theory, this would be good for the industry. But it is likely to raise the price of new vehicles as well, and this could restrain demand. It remains to be seen what the net effect will be, but there are indications that if the 75 percent rule starts to inhibit sales more than anticipated, then the requirements could be adjusted.