Americans like their wheels, whether it be a bargain-basement lease deal, a new SUV with all the bells and whistles, a sturdy truck or a pricey sports car that turns heads. Robust sales could turn the stock market up, as well.
Wall Street gets its first look at shiny new vehicle sales in August later today. Auto sales stalled during the financial crisis as credit dried up and consumer confidence plummeted. But new-vehicle sales have recovered to their pre-crisis levels, with monthly sales adjusted for the full year coming in consistently north of 16 million in recent months. Healthy auto sales not only indicate consumers’ willingness to spend, but also their confidence to take on big purchases that take years to pay off. According to Citigroup, the median estimate for total vehicle sales last month is 16.5 million, a tick above the 16.4 million in July but below the 16.8 million sales pace of June.
Back in late 2008, sales dipped close to the 9 million area and the fate of the U.S. auto sector was in doubt. The auto industry was in such a dire predicament that it motivated the government to bail out some U.S. automakers, including General Motors, as well as roll out the “Cash for Clunkers” program to spur sales of new vehicles. But the improvement in the auto sector has corresponded with the rebound in the U.S. stock market in recent years. Wall Street is hoping pent-up demand, more available credit, cheaper borrowing costs and innovation in the U.S. auto sector will spur continued buying. Currently, the average age of a U.S. car is 11.4 years, which is up 14% from 10 years in back in 2008. If auto sales come in strong again in August, it will reinforce the view that the U.S. economy continues to strengthen, a trend that bodes well for the stock market.