Signs good as United States car sales accelerate

The world's biggest economy is showing signs of revving up after American consumers bought vehicles at an unusually strong pace last month.

The world's biggest economy is showing signs of revving up after American consumers ignored tax increases and trudged through winter weather to buy new cars and lorries at an unusually strong pace last month.

It was the car industry's best January since 2008.

"It was like a sprinter out of the starting blocks," said Mike Jackson, the chief executive of AutoNation, the country's largest car dealership chain.

US car sales rose 14 per cent to more than 1 million, while Toyota's 27 per cent gain was the biggest among the major car companies. Ford's sales jumped 22 per cent and General Motors (GM) and Chrysler each reported 16 per cent gains compared with a year earlier.

The results left the industry optimistic about the new year. Businesses bought more lorries, consumers are ready to buy - their cars have reached a record average of 11.3 years old - and banks are making it easier with low interest rates and looser credit terms.

The stock market may also have inspired car buyers. The Standard & Poor's 500 index had its strongest January since 1997, and new-car purchases tend to rise or fall with the market. Also, employers have been hiring at a steady - if not spectacular - pace.

"We're in a fundamentally sound trajectory," said Mustafa Mohatarem, the chief economist for GM. He said the recovery from the recession in 2008 was still modest, but "those recoveries tend to be much more sustainable".

Whatever the incentive, people did not let chilly weather, or the heavier hand of the US Treasury, stop them from car shopping.

Sales ran at an annual pace of 15.3 million last month. If that holds for the rest of the year, car makers will sell nearly 1 million more vehicles than last year, when sales rose 13 per cent.

Analysts predict full-year sales of 15 million to 15.5 million this year. Although still far from the peak of about 17 million in 2005, the industry could sell 5 million more cars and lorries than it did in 2009, the worst year in three decades.

The strong January numbers came even though higher taxes reduced take-home pay for most Americans. Taxes rose after a 2 per cent reduction in social security taxes that was in place for two years and expired on January 1.

Sales might have been even higher without the tax increase, said Jesse Toprak, the vice president of industry analysts at the car pricing site TrueCar.com. He said the increase was costing the average new car buyer - those with a household income between US$70,000 (Dh257,096) and $100,000 per year - about $300 per month.

"That's almost a car payment," he said. Toyota sales jumped on the strength of the Prius hybrid cars and pickups, which rose 36 per cent, and the new Avalon saloon, which was up 50 per cent. The luxury Lexus brand climbed 32 per cent on strong sales of the new ES and GS saloons.

At Ford, last month's sales growth was led by the newly redesigned Fusion mid-size car, with a 65 per cent increase. Explorer 4x4 sales rose 46 per cent.

Bucking the trend was Ford's luxury Lincoln brand, which fell 18 per cent. Lincoln's new MKZ sedan, which was featured in a Super Bowl advert, is going on sale now, but could be tough for buyers to find. Ford's US sales chief Ken Czubay said the new Lincolns were undergoing extra quality checks that would delay shipments through to the end of April.

Sales of the F-Series pickup, the top-selling vehicle in the United States, rose 22 per cent. GM's Chevrolet Silverado and GMC Sierra pickups each enjoyed increases of more than 30 per cent while sales of the Ram pickup, Chrysler's top-selling vehicle, rose 14 per cent from a year earlier. Those gains give a strong indication that businesses are replacing ageing pickup trucks they kept through the downturn. Kurt McNeil, GM's vice president of sales operations, said the company had a 37 per cent increase in sales to small businesses such as building contractors, who normally buy pickup trucks.

Mr Jackson said people who focused on paying down debt the past few years were now making big-ticket purchases at a robust pace. "Consumers are saying, 'I'm moving ahead with my life. I'm getting a new vehicle.'"

Other car makers also reported good figures for last month. Honda's sales rose 12.8 per cent, Nissan's sales rose 2 per cent along with Hyundai's sales while Volkswagen's sales grew 7 per cent.

* with AP