Fri, Sep 06, 2013 - Page 15 News List

Auto sales maintain US economy growth


Edgardo Costanzo washes new cars at a Ford car dealership on Wednesday in North Miami, Florida. Ford announced it increased sales by 12.2 percent year-on-year, which makes it Ford’s best retail month since August 2006.

Photo: AFP

The US economy appears to be faring better in the third quarter than analysts had feared, with automakers reporting surprisingly strong sales for last month on Wednesday, helping to buoy expectations of a pullback in monetary stimulus ahead.

In another report, the Federal Reserve said strong demand for autos helped keep the economy on a “modest to moderate” growth path in recent weeks, an assessment that leaves the door open for a reduction in the central bank’s bond purchases.

Auto sales rose 17 percent last month to a seasonally adjusted annual rate of 16.1 million units. That was the fastest pace since October 2007 and beat the 15.8 million-unit rate analysts surveyed by Reuters had expected.

It was also the latest sign that economic activity is picking up after hitting a speed bump in July and supported stocks and bond yields, although the US dollar fell from a six-week high against a basket of currencies as investors look forward to a key jobs report today.

Auto sales are a key leading indicator of consumer spending, which accounts for about 70 percent of US economic activity.

“We continue to head in the right direction,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “With vehicle sales above 16 million [and] a slow but steadily improving job market, the Fed is going to feel comfortable tapering in September.”

The central bank has been buying US$85 billion in bonds each month to keep borrowing costs low. It is widely expected to reduce that amount when officials meet later this month and a strong gain in hiring during last month would cement those bets.

The auto sector’s good fortunes were captured in the Fed’s Beige Book report, which found that strong demand for motor vehicles lifted spending in most parts of the country in early July through late last month.

The report, prepared for the Fed’s Sept. 17 to 18 meeting and based on information collected from its business contacts nationwide, said several of the central bank’s 12 districts reported strong demand for auto-related products.

The strong sales reported by car makers and the Beige Book’s findings backed up a survey from the Institute for Supply Management on Tuesday showing an acceleration in manufacturing activity last month, driven by sturdy gains in new orders.

Strong demand for autos also fueled import growth in July, helping to drive up the nation’s trade deficit. The Commerce Department said the trade deficit widened 13.3 percent to US$39.1 billion.

Auto imports reached an all-time high, and overall imports rose 1.6 percent.

Exports slipped 0.6 percent even as exports of petroleum products hit a record high and the country sold more food and industrial supplies.

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