By Justin Hyde
DETROIT, Nov 29 (Reuters) - After hitting their weakest rates in four years last month, U.S. auto sales are expected to rebound slightly in November, thanks to small increases in incentives and improving consumer confidence.
The average forecast from Wall Street analysts calls for November sales to hit a seasonally adjusted annual rate of 15.8 million. That's well off the 18 million rate from November 2001, but a welcome improvement from October's 15.4 million sales rate, the lowest in four years.
"Although November looks like another so-so month for auto demand, we do not believe that incentive levels have risen much from October's high level, a small but encouraging trend," said Merrill Lynch analyst John Casesa. "It's either a sign of discipline or exhaustion on the part of automakers."
While November's sales rate is expected to be up from October, total vehicles sold are expected to be about 200,000 less, or about 1.1 million. If November's total sales matched October's, the seasonally adjusted annual rate would be a booming 17 million.
That's because the seasonal factors set by the Federal Reserve Board used to compute annualized sales rates reflect November's status as a traditionally slow month. Auto sales often weaken in the run-up to major elections, as a flood of political ads overwhelms the car ads dealers rely on to drive buyers into showrooms, and Thanksgiving tends to slow traffic as well.
Those factors were in force earlier this month, along with worries that buyer fatigue which pushed down sales in October would strike again. After several forecasts that sales were running below October's results, auto executives with Detroit's Big Three have been more positive over the past two weeks.
John Smith, General Motors Corp.'s incoming vice president of sales, said he thinks November sales will be around 15.7 million.
"People, I think, are pinched and maybe taking a bit of a breather. But all the fundamentals still seem to be strong enough," he told Reuters in an interview.
NO CASH? NO PROBLEM
The good news from fundamental economic data include a drop in U.S. jobless claims, along with improving consumer confidence and a rising stock market. Consumer spending accounts for two-thirds of the U.S. economy, and new cars account for roughly 15 percent of retail spending by consumers.
Automakers have boosted their incentives this month, which averaged $2,000 per vehicle in October for the industry as a whole and about $2,500 per vehicle for the Big Three.
GM has been aggressively pushing no-interest loans and its no payments for 90 days offer, a deal DaimlerChrysler AG's Chrysler arm has added as well. Ford Motor Co. offers early cancellation for lease customers, as long as they take another Ford vehicle.
All three have also added programs that give dealers bonuses for meeting sales targets. Some slow-selling vehicles get their dealer own incentives; Ford is offering a $10,000 price break to clear out inventories of its canceled Lincoln Blackwood pickup.
Inventories have been a growing concern for Wall Street, which worries that weak sales could leave Chrysler and Ford with too many unsold vehicles, forcing them to trim production in the first quarter of next year. (With additional reporting by Michael Ellis)