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Jittery Buyers, Political Limbo Slow Auto Sales

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August 31, 2012 by   Leave a Comment

After tracking well for so many months, the hugely promising 2012 auto sales recovery has leveled off — and appears unlikely to regain momentum before year end.

What’s the lowdown on the slowdown?

Automotive News reported that pent-up demand and an aging used-vehicle fleet kept August new-vehicle sales afloat, executives and analysts say. But weak economic fundamentals have the market in a rut — stuck at a 14 million annual pace.

“We’re not seeing upward spikes,” said Kelley Blue Book analyst Alec Gutierrez.

In an outbreak of cautiousness, three forecasters have cut sales outlooks for the year.

Consumer confidence is the missing element.

“People want a reason to commit to a new car, but there’s still some economic skittishness,” said George Borst, CEO of Toyota Financial Services.

Executives don’t expect much traction until passing political roadblocks. The November election is first. Then massive tax hikes and federal spending cuts automatically kick in Jan. 1, unless a deadlocked Congress can agree on legislation to alter or prevent them.

Jim O’Sullivan, Mazda’s top U.S. executive, says Europe’s economic crisis and uncertainty about how Washington policymakers will navigate the fiscal cliff is weighing on consumers.

“Let’s just say I’m guardedly optimistic about the back half” of the year, he said.

Forecasters put the August sales pace in line with the past five months. TrueCar.com sees the seasonally adjusted annual rate at 13.9 million, the same as in May. At the high end of five forecasts, LMC Automotive says 14.5 million.

The year started strong. January was the first 14 million SAAR since cash for clunkers and February’s rate rose to 14.5 million.

Automotive News reported that sales this year are substantially better than 2011′s 12.8 million units and are on pace for a third straight year of improvement.

“It’s being driven by lingering pent-up demand,” said Gutierrez, who expects August’s sales pace to hit 14.4 million. “But … there’s still a lot of uncertainty.”

The election is a big reason for that, says Toyota Financial’s Borst.

“Come November, there is going to be clarity in the direction the country is going to go,” he said.

But TrueCar.com analyst Jesse Toprak said consumer and business uncertainty over Congress is an even bigger drag on sales than the presidential contest.

“Congressional performance affects everything,” he said “The ability to lend, consumer comfort, business investment and hiring. It has an overarching effect on the economy and car sales.”

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