Rising consumer confidence combined with a rebounding construction industry pushed auto sales to near pre-recession levels in June.
Automakers sold about 1.4 million vehicles last month, a 9% gain from the same period a year earlier. The brisk sales amounted to an annualized pace of about 16 million, a threshold not seen since 2007.
“America’s families are better off than they were at the beginning of the year and they believe -- with good justification -- that the economic expansion is going to continue,” said Mustafa Mohatarem, General Motors Co.'s chief economist.
Much of the growth came from booming truck sales, fueled by the recovering housing and construction industries. GM saw its biggest increases in pickup truck sales with about a 30% gain in June from the same month a year earlier.
“Trucks are hot. There is no question about it,” said Kurt McNeil, GM’s sales chief.
But other buyers, especially consumers who are driving aging cars, are also heading into dealer showrooms, gravitating to small cars and crossovers, vehicles such as Ford’s Focus, Fusion, Escape, said Erich Merkle, Ford’s sales analyst.
GM sold nearly 33,000 of its Cruze, sub-compact sedans, a record for the automaker and 73% gain from a year ago. Honda Motor Co. sold nearly 32,000 Accords, a 10% improvement. Toyota Motor Corp. sold almost 36,000 Camrys, a 12% increase.
The surging auto industry reflects improvements in the broader economy and the housing market, Merkle said.
“If you take a look at consumer sentiment, it is running strong and that has a lot to do with what we were seeing behind the car sales numbers last month,” Merkle said. “As you see property values start to increase, people seem to feel better financially, and the stock market has been doing relatively well, despite some of the recent down days.”
Scott Anderson, chief economist of Bank of the West agreed.
“U.S. consumers are in the best financial shape they have been in six years,” Anderson said. “The amount of money they have to put aside to manage their debt load is at historically low levels while property values and stock investments are starting to rise.”
On Tuesday, real estate information firm CoreLogic said national home prices rose 12.2% this year through May compared with the same period in 2012.
Auto sales are also helped by low interest rates. Shoppers may be rushing to purchase cars worrying that loan rates will take rise like they have for home mortgages in recent weeks, Anderson said.
Other economists aren’t convinced that surging car sales signal a broad economic recovery.
"What is going on here is people who did not buy a car in the recession and then didn’t buy a car after the recession because the economy was so weak are starting to turn in their clunkers.” said Ken Goldstein, an economist with the Conference Board.“It is not because they feel more confident or have more money; it is because they need a new car.”
While people are buying cars, they are not rushing out to purchase furniture and appliances, which would signal greater confidence in the economy.
“We are going to get there, but it will be another six to nine months,” Goldstein said.
Carmakers anticipate even better sales ahead.
“The auto industry led the economic recovery through the first half of 2013, kicking off a strong summer selling season, which we expect will carry into the second half of the year," said Bill Fay, Toyota’s U.S. group vice president and general manager.