Auto Sales in 2000 Likely to Set Another Record

Economists and auto industry analysts gathered at the Federal Reserve Bank of Chicago's seventh annual Auto Outlook Symposium this summer to forecast auto sales and industry trends. The consensus was that sales of cars and light trucks this year will likely hit 17.3 million units, about a half a million more units than last year's record-setting pace. Sales boomed at an 18.0 million unit annual pace for the first 4 months of this year. In 2001 analysts expect sales to moderate to about 16.4 million units, still an extraordinary pace compared to historical averages. If the forecasts are correct, 1999-2001 would be the three strongest sales year in industry history.

What has driven sales to record levels? Much of the story is familiar: strong labor markets, high consumer confidence and strong growth in household incomes. In addition, pricing pressures in a competitive global market have improved affordability. Monthly automobile payments as a share of household income fell to the lowest level in four decades. Ownership rates are probably higher than in the past. One analyst also noted that the last surge in auto demand was in 1992 and 1993. Given the typical life span of vehicles, the current surge in sales was predictable, but undoubtedly reinforced by an extraordinarily strong economy.