U.S. car sales are expected to keep growing even if Congress fails to reach a settlement preventing the feared fiscal cliff.
Fiscal cliff or no fiscal cliff, U.S. car sales are expected to continue rising over the next two years, according to the economic forecast prepared by the University of Michigan. The U-M forecast is important because it serves as the basis for production and sales forecast.
In addition, Richard Curtin, the directors of U-M’s widely quoted surveys of consumers, also reported that consumer sentiment is inching up. The improvement in consumer sentiment indicates the likelihood of strong economic growth during the year ahead, Curtin said.
In addition, in another sign economic conditions are beginning to improve, providing a broader platform for car sales, personal income is also positive for the first time in years, he noted. But mortgage debt is still considered excessive, Curtin cautioned.
Nonetheless, the auto industry appears to few obstacles that could slow it down.
The Michigan forecast predicts that light vehicle sales – on pace this year to post the largest annual increases since 1984 – will continue to improve from 12.7 million units in 2011 to 14.3 mill this year with the forecast anticipating demand jumping to 15 million next year and 15.6 million in 2014.
Overall, the U.S. economy’s gross domestic product is expected to grow by a modest 2% in 2013 and by 2.6% in 2014, compared to 2.1% growth this year, according to U-M economist Joan Crary.
Existing single-family home sales are projected to rise from 3.8 million in 2011 to 4.9 million in 2014 for an annual increase of about 400,000 over the forecast period.
Crary said the U.S. economy as a whole will add 2 million new jobs during 2013 and another 2.3 million in 2014 as the unemployment rate nationwide falls from 7.9% to 7.2% over the next couple of years.
The auto industry has been one of the few consistently positive factors helping drive the slow recovery of the past few years.
But George Fulton, the head of the university’s economic forecasting unit, said the improvement in the housing market is emerging as one of the bright spots in the economic. An uptick in housing starts is certain to lead to stronger sales of new vehicles, he said.