After some padding in September by the Big Three's strong fleet deliveries, October's U.S. light-vehicle sales are forecast at a 15.9-million seasonally adjusted annual rate (SAAR).
October is expected to be the “trough” month in the current cycle, before results rise in November and again in December. (See related data: Ward's Forecast - October U.S. Lt. Vehicle Sales)
Sales volume is forecast at 1.24 million units, for a daily selling rate (DSR) over the month's 26 selling days of 47,666, 3.4% below year-ago's 49,327 – 27 selling days. It will be the third-straight month the DSR is below year-ago's. Last year's SAAR was 16.9 million.
If not for the push by fleet sales, September likely would have represented the bottom month, as the summer surge saw sales peak at a 20.6 million SAAR in July before dropping to 16.7 million in August and 16.3 million in September.
It is unusual, even after huge upswings such as July's, for the SAAR to drop three consecutive times from the prior month.
Should the SAAR drop in November from October, the 4-month string of declines could be taken as an indicator of a significant long-term slowdown – even if December posts an upturn.
Early results already show a slower start to October compared with September. And although they are one of the most unpredictable aspects of forecasting monthly sales, fleet deliveries in October likely will not repeat September's results for the Big Three.
Inventories are working against a stronger month, as well. Total inventory is enough to support higher demand, but the mix is not favorable.
With high energy prices beginning to affect consumer spending, dealer inventory in the most-affordable segment, Small Car, fell 39.1% from year-ago heading into the month due to a 12.2% rise in September sales (8.9% for the third quarter).
Inventory for pickups and SUVs, which most years have their best market penetration in the fourth quarter, were down 15.4% and 18.4%, respectively, from year-ago.
And although incentives likely will pick up by the end of the month should sales nosedive to a pace well below the forecast, volume leadersCorp. and Motor Co. have a low mix of '05 models to unload and might be loathe to start putting a lot of heavy incentives on '06 models this early in the model year.
Overall, light-vehicle inventory ended September at 3.03 million units, 16.0% below year-ago. Days' supply was 57, compared with 50 the prior month and year-ago's 63. (See related data: Ward's U.S. Light Vehicle Inventory by Group)
The outlook for Oct. 31 is for light-vehicle inventory to stand at 3.33 million units, 12.4% below prior-year. Days' supply is pegged at 70, vs. 77 in like-2004. (See related data: Ward's Forecast - October 31 U.S. Dealer Inventories)
Strong production scheduled for pickups, especially at GM, along with SUVs and small cars, should bring the inventory mix closer to a balance with demand by Nov. 1.
The inventory outlook, itself, sets the industry up for a stronger November and another end-of-year flourish in December.
Whether light-vehicle sales meet Ward's fourth-quarter prediction for a 16.6 million SAAR – finalizing the entire year at 17.1 million – will depend on how much consumers pull back on spending and how much auto makers are willing to sweeten the pot to shore up year-end numbers in light of the current focus on regaining price control (i.e., value-pricing).
Thus, there is good reason to lower the October-December outlook. But the overriding trend in recent years is for consumers and the auto industry to surprise on the positive side.