Investors can cheer strong auto sales figures

Auto sales hit a seasonally adjusted annualized rate (SAAR) of 17.8 million in May, according to the Bureau of Economic Analysis. This rate, the highest since summer 2005, is a full million units higher than the 16.8 million year-to-date absolute number (which includes the strong May results).

We believe this number is a positive signal for the industry, but we note that other factors played into the strong results. Most importantly, the calendar worked in the dealers’ favor for the month. Not only did May include five weekends, but it also benefited from two weeks of Memorial Day sales. Likewise, the Northeast saw very warm weather, which drove consumers to the dealerships after a harsh winter. It appears that some of the sales were from pent-up demand, as inventories of 56 days equaled the 10-year May average, even after a strong month. In other words, there had been inventory on the lots.

Still, the number is a positive. Incentives were only moderate and both of the major domestic manufacturers saw positive sales growth. While we would never use one month’s data as a reason to make a directional call on the group, investors can be pleased with the results.

The views expressed represent the Manager's assessment of the market environment as of June 2015, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Notes from the desk

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