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Worries of bad old days

By Louis Rumao

It seems 2014 was like the good old days for the auto sector in the US. But that has sparked some worries about a return of the bad old days, too.

After plunging briefly during the recession to lows unseen since the early 1980s, US light-vehicle sales have climbed back to the level hit at the height of the housing boom. From 2009 to 2011, millions of potential sales were lost. Just to maintain the average age of the vehicle fleet, now near a record, annual sales at recent levels of 16.5 million a year are needed.

Auto sales are an early indicator of consumer spending, in general, and pickup trucks an early indicator of construction activity. Full-year sales for 2014 finished just above 16.5 million vehicles matching the tally in 2006. Rising demand has allowed automakers to boost prices for their vehicles, however. In December, sales rose almost 11 per cent to more than 1.5 million vehicles, with strong showing by pickup trucks and large SUVs, spurred by low gasoline prices.US average gasoline prices are 34 per cent lower than a year ago, and in much of the country are less than $2 per gallon.

The pace of sales growth is expected to slow in 2015, with a modest growth to the 16.7 million to 17 million vehicles is expected by analysts. Any deceleration in US growth could be damaging at a time when other global markets are slowing.

(Full Text in PTA Feb/March issue)

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