The numbers: Sales of new cars and trucks in the United States rose 5.4% in February, recovering from a slow start at the start of the year and offering fresh evidence of the economy’s strength.
According to Ward’s Intelligence, auto sales increased at an annual rate of 15.8 million last month compared to 15 million in January. Economists had predicted an annual rate of 15.4 million.
The figure reflects the number of new vehicles sold during the entire year if the same number were purchased each month as those sold in February.
Car sales got off to a slow start in January, but that was largely because the holidays were so busy. December sales rose at the fastest pace in nearly three years.
A strong cold snap also kept buyers away in January, analysts said.
“Some of these sales may be a ‘return’ from consumers who wanted to purchase in January but were for whatever reason held back from making the purchase due to the unusually cold weather,” said macroeconomic strategist Will Compernolle of FHN Financial.
“In any case, this is an encouraging sign that January was not necessarily representative of overall first-quarter consumer spending,” he said.
Vehicle sales rose in 2023 to the highest level in four years despite a sharp rise in interest rates. About 15.5 million new vehicles were sold in the United States last year
Sales are expected to increase again in 2024, but high interest rates could weigh on purchases in the first half of the year.
However, borrowing costs could decline by the summer if the Federal Reserve cuts interest rates as expected. This could help boost sales.
Car purchases play an important role in retail sales and overall consumer spending, the main driver of the economy. Strong car sales also tend to be an indicator of a strong economy.
Consumer spending was quite brisk in the second half of last year and it appears that spending will not slow down much in the first quarter of 2024.
According to forecasts, the economy is on track to expand at a healthy annual rate of 3% or more.