New-vehicle sales in August are forecast to reach 1.49 million, up approximately 100,000 units from August 2017, according to a sales forecast from Cox Automotive. The seasonally adjusted annual rate (SAAR) of 16.8 million units forecast for August is up incrementally from last month's 16.7 million and up from the sales rate of 16.5 million in August 2017.
"The market remains strong and all the talk of higher interest rates and trade tariffs is not chasing away buyers," noted Charlie Chesbrough, senior economist at Cox Automotive. "However, we are still forecasting a slowing sales pace over the remaining months of the year as buying conditions slowly deteriorate due mostly to higher interest rates and continued high gasoline prices."
Year-over-year comparisons for August will be difficult to make, according to Cox Automotive. Sales during the final week of August 2017 were disrupted by Hurricane Harvey's impact in Southeast Texas, specifically in Houston, the fourth most populated city in the U.S. While the number of selling days is identical at 27, the disruption in sales due to the category four hurricane of last year likely drove August 2017 total sales downward, although the exact number is unknown. If large year-over-year gains occur in August 2018, a low base from August 2017 would likely be a contributing factor.
The 16.8-million SAAR forecast for August is below the 17.1-million rate the market has been averaging so far this year. Buying conditions continue to worsen due to higher interest rates and gas prices remain elevated, hitting consumers' pocketbooks. Another contributing factor to weakening sales may be trade policy, according to Cox Automotive. Steel and aluminum tariffs have been in place for a number of months now, driving production costs higher and negatively impacting profit margins.
With less margin available, automakers are demonstrating more incentive restraint. Days-supply is also relatively stable, driving further incentive discipline.
Cox Automotive's forecast for full-year sales in 2018 is 16.8 million vehicles, down slightly from the 17.1 million sold in 2017.
The all-time record for August sales was set in 2002 when the sales pace reached 18.1 million thanks in part to aggressive incentive programs that were still in place following the 9/11 attacks in the United States. The record volume for August of 1.71 million was also reached that same year.
Although the August sales pace is forecast to improve over July, sales are expected to moderate over the rest of the year, according to Cox Automotive. Higher interest rates are not conducive to vehicle buying. When coupled with higher vehicle prices, a gradual decline in affordability slows the market. In addition, off-lease used-vehicle volume continues to grow. These mostly-three-year-old vehicles, selling at a 30-to-50 percent discount to new, are a threat to new-vehicle sales volume.