Sales of U.S. cars bounced back in mid-August

August 25, 1993|By Knight-Ridder News Service

NEW YORK -- Sales of American-made cars rebounded sharply during the second 10 days of August, suggesting that the slump in the first selling period of the month was an anomaly related to low inventories, economists said yesterday.

But enthusiasm about the figures was tempered by a survey in Ward's Automotive Reports that revealed that automakers have reduced third-quarter production plans by 5.4 percent -- or a total of 171,000 vehicles.

"Although today's numbers look better, you don't have ringing support from the industry itself about the current environment," said Michael Niemira, an economist at Mitsubishi Bank Ltd.

Sales figures released yesterday showed that American-made cars were sold at a seasonally adjusted annual rate of 7 million units in the Aug. 11-20 period, up sharply from the pace of 5.8 million units in early August.

The rate exceeded the median forecast of 6.3 million units reported in a survey of economists.

The mid-August selling rate also exceeded the rate of 6.7 million units for July, although it was below the post-recession high of 7.1 million units in June.

Meanwhile, sales of light trucks were reported at a rate of 4.9 million units, up from 4.5 million in early August.

The planned production cutback, which Ward's attributed largely to General Motors Corp., was puzzling in light of reports that the recent decline in automobile sales was prompted more by lean inventories than by lackluster demand, said David Cohen, an economist at MMS International.

If low inventories did indeed cause the slowdown in sales, Mr. Cohen said, automakers would be expected to boost production plans, not cut them.

"It's as if the industry is a little less sure of the environment," Mr. Niemira said. "They're not sure demand is really back."

GM underperformed the rest of the market. Its market share in domestic cars dropped sharply, to 36 percent, from 42.3 percent, in the first 10 days of August.

That was the lowest share for GM since December. As recently as mid-July, GM's market share of domestic cars was 48.4

percent, its highest share in a year.

Average daily car sales for GM rose 0.2 percent in the second 10 days of August. Ford Motor Co.'s average daily car sales were up 6.8 percent.

Ward's estimated that Chrysler Corp.'s average daily car sales were up 45.5 percent.

The big swings in market share suggest that inventories were the big factor in the sales slump, thus making the planned production cutback more disconcerting.

For now, the planned output of cars in the third quarter will do little to boost growth in gross domestic product, Mr. Niemira and Mr. Cohen said.

Auto production had been counted on to provide a big boost -- up to 1 percentage point -- in the third-quarter growth rate for gross domestic product.

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