Auto Industry Thrives Despite Economic Fears

Total vehicle sales are expected to increase for the month of April, as Americans look to replace their aging cars and trucks with newer, more fuel-efficient rides.

Along with pent-up demand, increased consumer confidence and decreased unemployment, car company incentives will drive the auto industry to its sixth straight month of powerful growth.

Economists, surveyed by Bloomberg, forecasted average sales of 14.32 million annually adjusted vehicles, but some are more optimistic, much more optimistic.

“The expectation is that April will be the best month in about four years,” said Bernard Baumohl, chief economist of the Economic Outlook Group. He expects sales to rise because the economy, as a whole, has improved; consumers now have more confidence. “Now that the economy has turned a corner there is an incentive for people to replace their vehicles.”

The average age of cars on the road in America is a record 11 years, said Baumohl. And now that more Americans are working, there is extra income to make purchases. These factors will bolster the auto industry against dismal first quarter GDP growth numbers and the poorer than expected March jobs report. Baumohl, who wrote the book on economic indicators, would not be surprised if the industry sells 14.5 million vehicles in April.

Declining gas prices is yet another factor that will free up income for strapped American consumers, and the economy as a whole. Polk, an automotive research and consulting company in Michigan, recently revised its sales forecast for the year to 14.3 million light vehicles, a jump up from 13.7.

“I do think that if gas prices soften, as they appear to, it will help the industry. It will also help the economy,” said Tom Libby, a senior auto analyst with the firm. “We’ve had four or five months of strong sales, so there don’t appear to be any reasons [April] will be a let down.”

Libby refused to make a prediction but, like Baumohl, said that poorer than expected economic indicators will not hamper the auto industry.

“We have no reason to be pessimistic,” he added.

The Gap Between Personal Income and Outlays is Expected to Continue in March

It’s all about the jobs market
April 29, 2012
By Natalia V. Osipova

 

American consumers’ appetite continue to outpace salaries and wages.

Analysts say they expect to see personal income figures for March rise 0.2 percent and spending rev up 0.4 percent. The Bureau of Economic Analysis will issue the official numbers on Personal Income and Outlays on Monday 8.30 EST.

The income growth rate is likely to be unchanged from February, influenced a still-anemic jobs market. Regional and state unemployment rates held steady in March. And spending, although pulled back from a 0.8 percent rise in February, should remain strong boosted by the early spring, Easter holidays and the new iPad release. The spending data in  the first quarter GDP report also bolster optimism about continued consumption.

“We still have spending growing faster than income,” said Mark  Vitner, senior economist at Wells Fargo securities. He indicated, that a drop in layoffs and warm temperatures supported positive consumer sentiment. “People that have been working feel more secure about their jobs and more willing to move out and make major purchases , like auto vehicles and household appliances,” said Vitner.

Auto sales in March remained solid, up 13 percent, despite rising gasoline prices. Retail sales went up 0.8 percent, as Americans shopped for the holidays and lined up for the new iPad, which went on Sale March 16.

The first quarter GDP report showed that  real personal consumption gained 2.9 percent.  But this most likely reflected a seasonal distortion. “It’s difficult to put much trust in numbers in March in April,” said Gary Schilling, president of A. Gary Schilling & Co consulting firm and a Bloomberg View columnist. He said, Easter shopping could confuse real spending until May.

Although personal consumption is expected to outpace income growth for the second consecutive month, analysts don’t think it’s a trend. “That can’t continue indefinitely,” said Vitner. Consumers will soon run out of resources to support aggressive consumption, he and other analysts interviewed said.

Given the fact that in March, most economic indicators were sagging, there is little support for for a higher personal income rate.

“In the current environment nobody is getting raises,” said Thomas Simons, Jefferies & Co vice president and money market economist.  “There is no reason for employers to give workers incentives when it’s difficult for them to go and get another job,” he said.

In addition to that, modestly rising income is absorbed by inflation. “Earnings are growing slower than inflation and it means consumers are losing their purchasing power,” said Francesca Panelli, an economist for Banca Aletti.

Labor market figures give the most accurate clues for the discrepancy between income and spending.

“We want to see more income growth and stronger consumption spending supported by the healthy jobs market. That would be ideal,” said Sweet. But, increase in hiring doesn’t result in the prosperity, he continued. “The jobs market has been geared towards low-paying industries.”

So the rising number of jobs may not even be a good sign for income growth in this “choppy recovery.”

“If the jobs market starts to tighten, we will see wage growth picking up,” said Sweet.

Overall Durable Goods Expected to Continue Plunging In March

Overall durable goods orders are expected to show a slight decrease in March confirming a slow economic recovery ever since the beginning of the quarter.

Economists are predicting Wednesday’s report to headline a 1.7 percent drop in overall orders. The sharp fall of Boeing orders this past month – from 237 in February to 53 in March – is what has analysts calling the “big maker” of the decline.

While the number isn’t “great,” analysts agree with the idea that we shouldn’t get bugged down by the head figure.

Durable goods being an extremely volatile indicator, largely because of defense and commercial transportation orders, has economists looking beyond these numbers to analyze the underlying economic well-being of the manufacturing sector.

Excluding transportation – and looking more closely at household goods, cars and equipment — expectations are more cheerful yet soft.

“The economy is growing but we’re still looking at a fair recovery,” said Sean Incremona, a senior economist at 4Cast Inc.

Indeed.

Since the end of last year – which saw its biggest increase for the month of December with an all time high of 3 percent due to a tax credit that benefited businesses purchasing power, durable goods orders have since largely dropped and only risen softly in this year’s first quarter. The Department of Commerce’s data showed that goods orders rose 2.2 percent in February to $211.8 billion, only partially reversing January’s 3.6 percent sharp decline.

Economists predict that last month’s durable goods excluding transportation will rise by a modest 0.5 percent.  Meanwhile, they predict core capital goods to increase 1.2 percent.

“This is a mild trend,” said Incremona. “But I believe we’re still looking at a tax credit hangover effect.”

Regardless of this rather small increase, economists agree with the idea that these numbers are optimistic.

“We’re in a period of stabilizing our economy right now,” said Nathaniel Karp, an economist at BBVA Compass Bank.

In fact, American manufacturing will probably give way to the handicapped European and Chinese business investments, which have stalled after more than a decade performance.

But as investors look to Wednesday’s release as a way to analyze U.S. economic growth, economists believe the indicator will not largely influence businesses.

“The story this month is more about what the Fed will say,” said Tom Porcelli, a senior economists at RBC Capital Markets.

The Fed will release its latest rounds of quarterly forecasts at 2pm on Wednesday, and many believe that economic growth in the United States might be higher than the 2.2 percent estimate given in January — a good sign that recovery is on its way.

“Looking at durable goods excluding transportation trends, we see the conditions for recovery are positive,” said Karp. “And that should reflect in the Fed estimates, demonstrating that overall conditions from companies are relatively solid and strong.”

 

Home Prices Expected to Fall More Slowly in February

Home prices are expected to drop at a slower rate for the second month in a row, a sign of a new, if faint, stabilization in the housing market.

Standard & Poor’s Case-Shiller home-price indices for February will be released tomorrow with an estimated 3.4 percent year-over-year drop average according to 31 economists surveyed by Bloomberg. This will be the 10th consecutive month of decline. December and January saw a 4.1 percent and 3.8 percent drop, respectively.

On a monthly basis, prices are expected to drop by 0.8 percent, the same that was seen in January. Home prices are still off by over 30 percent from the highs seen in June 2006.

Even while other parts of the economy like the stock market are sending mixed signals to consumers, the housing market is seen as steady, according to Sean Incremona, a senior economist at 4Cast Inc.

“Prices and supply and demand are coming in line,” Incremona said. “It’s not prices anymore, its whether or not you or going to have job.”

A survey by Fannie Mae found almost three-quarters of Americans thought it was a good time to buy a home in March. The same survey found 14 percent of American thought it was a good time to sell a home.

While the prices are still in decline, its an improvement from February 2011, when prices had started a double dip and the chairman of the Index Committee at S&P Indices, David M. Blitzer said “there is very little, if any, good news about housing.”

Contrast that to Ben Bernanke last week when he said that there was a “slight bit of encouraging news here and there in the housing market,” a statement that comes as close to an endorsement from the abstemious Federal Reserve Chairman.

The threat of rising interest rates and middling job employment figures still looms. While the economy has faltered in the last few weeks, the Case-Shiller data lags almost two months and so any bad news in April would not show up until the end of June.

But increased sales, reduced inventory and improved consumer confidence are positive signs the housing market has had this year. A few months of flat prices, however, are needed before a turn around, according to Nathaniel Karp, a BBVA Compass Bank economist

“Right now it doesn’t look like we reached that level,” Karp said. “But were very close to that bottom, for sure.”

Existing Home Sales for March Expected to Rise

A surprisingly warm weather, low mortgage rates and an overall positive economic outlook will likely drive the US existing home sales up for March.

The existing home sales for February were reported at 4.59 million by the National Association of Realtors (NAR). Economists estimate the sales for March to cross the 4.60 million mark. After a mild winter, the spring home buying season looks cheerful as home contracts increase.

“If activity is sustained near present levels, existing-home sales will see their best performance in five years,” said Lawrence Yun, NAR chief economist in a press statement. “Based on all of the factors in the current market, that’s what we’re expecting with sales rising 7 to 10 percent in 2012.”

Although home sales have been flattish since the beginning of the year, they have improved from extremely depressed levels since the second half of 2010, says Thomas Lam, chief economist at the OSK-DMG group, based in Singapore.

“I’m expecting existing home sales to come-in at 4.62 million units in March,” said Lam.

He attributes the possible increase to other macro-economic conditions, which remain positive. Low interest rates are also encouraging home buying says Lam.

“The gradual improvement in home sales partly reflects the continued, though uneven, recovery in the labor market, conducive levels of mortgage rates and some less uncertainty over the economic outlook,” Lam said.

The bout of strong housing numbers is also a seasonal phenomenon says Dr. Mike Englund, principal economist at Action Economics.

“The first quarter performance is always encouraging, but the activities might slow down in the second quarter as the seasonal effects wear off,” said Dr. Englund.

He expects the home sales will increase by around 3.5 percent and will go up to 4.75 million units.

A considerable proportion of the sales will continue to be distressed sales. In February the distressed sale component was around 34 percent from the total home sales. And it will still take at least two years for this toxic inventory to clear out from the market.

While the housing indicators continue to show strong signals that the market is on its way to recovery, some factors like the large supply of homes and government policies might prevent it from a fast recovery.

“The overall excess supply of homes and the lack of uniformity on housing-specific government policy will continue to hold back the recovery in the housing market,” said Lam about the future outlook of the US housing market.

Excluding Autos, Retail Sales Still Going Strong

A sharp drop in auto sales will likely drag down the overall increase in retail sales, but other sectors are likely to show strong gains.

This March is the warmest on record, and this unseasonably pleasant weather boosted sales in most other categories. People would likely have spent more money on clothes and accessories, at restaurants and on home-improvement projects, and a little ahead of schedule. The new Apple iPad, which was also released in March, significantly boosted electronics and e-commerce sales.

But the weather impacted motor vehicle sales a little differently. People were buying the cars they might have bought in March a little ahead of time, driving February unit sales numbers up and March numbers down.

Carmakers sold more than 15 million vehicles, when annualized, in February, an unusually high number. For March, this number had fallen to 14.3 million, lower than what economists had predicted. This sharp decline is nothing to worry about, said Bill Jordan, economist at Wrightson ICAP, as it is not a new “trend towards deceleration, but a one-month aberration.”

Pent-up demand and the aging fleet will likely give the auto unit sales number a slight boost from April onwards, averaging at a very respectable 14.5 million, annualized, said Jordan.

However, it will affect the overall retail sales number in March, and make it look a little more disappointing than it is.

“In terms of the growth rate between February and March, that should keep the headline retail sales from doing so well—probably a 0.2% increase,” said Chris Christopher, economist at HIS Global Insight. “If you take the autos out, we think that the increase in March will be anywhere between 0.6% to 0.7%.”

Despite a soft labor market and mild income growth in March, consumers still went out more and spent money on discretionary items. Consumer confidence reached a one-year peak towards the end of March, and this will likely be reflected in the general merchandise, building material, restaurants and bars categories in retail sales report for March.

“Garden supply and building material stores such as Lowe’s or Home Depot should have pretty good sales,” said Christopher. “Because when you have warmer weather, especially in the northeast, then people will go out and get all their home improvement needs done a little ahead of schedule.”

“In addition, clothing should do well. Because when you have warmer weather people will go out and buy the summer or the spring line of clothing a little ahead of time.”

Gasoline prices are still on the rise, but the increase isn’t as sharp as was at the same time last year. But a disruption in the supply, perhaps due to geo-political unrest in Iran, or increased global demand might still cause oil and gas prices to skyrocket, which would have an adverse effect on the economy.

“Higher gas prices might raise retail sales in the near term, but that will have a crowding out effect over a slightly longer horizon,” said Sean Incremona, economist at 4Cast Ltd.

But gas prices will only hold down spending in other sectors if price nears the $5/gallon mark, he said. And this is an unlikely scenario.

“It seems like most of the increases right now are going to be temporary,” Incremona said.

After a lackluster job report in which only 120,000 jobs were added in March—half of what economists had predicted, there’s some worry that the improvement in the labor market could peter out and income growth could stall. This would have a depressing effect on sales in the future, said Jordan.

“It’s not our projection, but that’s the main worry,” he said.

But these concerns will have little effect on the March retail sales number, which is likely to be stable, almost “run-off-the-mill,” said Jordan.

“It’s not very weak, it’s not very strong,” he said. “Nothing spectacular, but decent.”

As More Shoppers Go Online, Retailers Close Stores, Open Warehouses

Best Buy, a consumer electronics retailer, will close 50 stores this year. Sears, best known for selling appliances, tires and tools, also plans to close 173 stores within the first half of this year.

Best Buy and Sears are amongst many brick-and-mortar retailers losing business to online shopping websites like Amazon.com.

It isn’t just hardware and electronics retailers that are seeing this shift in consumer behavior. More people are choosing to buy that dress or those pair of shoes online.

Macy’s Inc. reported a 7.3 % increase in sales in March 2012 as compared to March 2011, on a same store basis. The increase in online sales during the same time period was a striking 35.6%.

Online retail is starting to out-run the pace at which store-centric retailers sell goods, and it’s starting to show. Top retailers like Macy’s, Dillard’s, JC Penney and Nordstrom are pumping billions of dollars into building up the online arms of their businesses while downsizing their physical retail presence to keep up with this shift in buying behavior.

While store-centric retailers are closing stores, online retailers are looking to open them. Retailers like eBay and Google Chrome have discovered there are distinct advantages to having a physical presence.

Traditional brick-and-mortar stores might have lost some of their relevance, but they are far from obsolete. They are merely changing to accommodate how today’s consumers prefer to shop. They have become showrooms, three-dimensional advertisements, almost, where consumers can interact with products, said Paul Swinand, a retail analyst with Morningstar Inc. They also offer consumers a direct channel of communication with a company representative.

“If I’m going to buy a shirt at Dick’s, I still need to see how it fits. But I might order three more online,” Swinand said, “And I still might want to return one to Dick’s that didn’t work out.”

And that’s the trick to finding success in the world of retail—striking the perfect balance between a strong online presence with strategic physical placement, said Howard Davidowitz, chairman of Davidowitz & Associates Inc, a retail consulting and investment banking firm.

Which is why brick-and-mortar retailers are trying to integrate the ease and convenience of online shopping with the satisfaction of the sensory feedback loop of physically handling a product. They’re using tablet computers to bridge the gap between online and traditional retail.

Guess, Macy’s, Puma, JC Penny are among the early bird retailers who’ve already incorporated tablet computers in their sales strategy. And there are many more that are either currently testing tablets in stores or are planning to do so this year.

Tablet computers are a way to engage consumer and hold their attention, said Davidowitz.

“Most retailers are focused on interactivity as an element of service,” he said. “It’s a way to build customer loyalty. It’s also a way to generate footsteps.”

Online retailers are also realizing that having a physical presence can be a real advantage.

“Now if you’re an online retailer, your business is growing, but you recognize that the brick-and-mortar guys have some advantages,” said Davidowitz, “Returns—they can bring it to the store. They can shop and actually see it.”

EBay realized this a while ago, when they opened their first temporary pop-up store, in New York City in 2009, and continue to do so seasonally. Google recently opened its first store in London. Amazon and LivingSocial plan to open their first stores within the year.

The line between online and traditional sales business models is blurring, and the bigger players are keeping up with the changing demand. But smaller brick-and-mortar businesses might not be able to keep up, said Swinand. Online retail is an economy of scale that smaller businesses just cannot achieve.

“There’s this popular notion that the Internet levels the playing field. In this case it doesn’t,” says Swinand. “It gives the Macys’, the JC Pennys, the Sears, the big companies more of an advantage.”

“But at the end of the day, if the existing retail physical landscape can do more with less, and the customers are happier, that’s good for everybody.”

 

Howard Davidowitz, chairman of Davidowitz & Associates Inc, a retail consulting and investment banking firm, talks about the merits of online and off-line retail:

Europe’s failing economy: a one-two punch for U.S. exports

The global consequences of weak demand in Europe will likely drive up the U.S. trade deficit for February and in the coming months.

In January, the trade deficit hit $56.2 billion, its widest point since 2008, the year before the recession. So far, modest export growth has helped offset strong imports. Yet economists are forecasting slower growth in exports. This is due in part to Europe’s economic crisis, but also to the drag it’s putting on China’s manufacturing sector.

“The trade deficit is going to continue to get bigger,” says Dr. Robert Brusca of Facts & Opinions Economics. “The U.S. is exporting in world economy that is increasingly challenged. This is making it difficult for U.S. firms to export — and exports are an essential part of recovery.”

As Europe continues to slide deeper into debt and news of a possible bailout in Spain threatens markets, the continent’s woes will hit U.S. exports in more ways than one.

The direct effects are already being seen. Exports to Europe and the European Union have trended downward since October 2011, falling 9% and 10% respectively, while the U.S. trade gap with its European partners has narrowed slightly in the last few months.

The second hit comes by way of China. To meet demand in Europe — its largest trading partner — China imports raw materials, such as waste paper and scrap metal, from the U.S. A slowdown in Europe would dampen China’s manufacturing sector, push down orders for U.S. raw materials and contribute to the contraction of China’s export-driven economy.

If this scenario plays out, exports will be unable to keep pace with U.S. imports, which continue to trend upward. A steady uptick in crude oil prices due to tensions over Iran and the onset of the U.S. driving season will also help drive up the trade deficit.

Partially off-setting weak demand for raw goods from China is the fact that the country’s economy is diversifying. This in turn opens up new markets for U.S. goods.

“Incomes in China have risen, and as a result, diets are diversifying,” says economist Mario Moreno of the Journal of Commerce. “So even though the demand for raw materials has decreased, China is still demanding meat, grains and other food products from the U.S.”

What is more, as the value of the renminbi continues to rise, as it did by 12 percent between June 2010 and February 2012, Chinese consumers will be better positioned to purchase goods and food from the U.S.

These factors won’t completely offset the domino effect of Europe’s economic crisis. But they will provide some respite until Europe can get back in the trade game with its two major partners.

Job Numbers Up, but Disappointing

The economy seems to be losing momentum as job growth slows dramatically at the end of the first quarter.

The addition of 120,000 private sector jobs are only half of the 240,000 jobs added in February, a disappointment after three consecutive months of positive gains over 200,000. And while the unemployment rate dipped slightly by .1 percent, the slowdown in temporary hires and retail job losses show cracks in what many thought to be robust growth.

“This is not a ‘Good Friday’ with respect to the labor market,” says Ken Mayland, President of ClearView Economics in Ohio.

Retail jobs fell by 34,000 in the month of March despite a 0.8 percent gain in consumer spending in February – the biggest increase in seven months – and a rise in consumer confidence to 76.2 points – the highest it’s been in a year.

Increased productivity in retail may be to blame for the decrease in jobs as more companies adopt cost cutting measures.

“There’s new computer technology that aids the retailer and works toward reducing the headcount and of course there’s all the Internet retailing – that’s the new model as opposed to the brick and mortar model,” says Mayland.

The decrease could also be an organic slow-down from record annual sales of $4.7 trillion in 2011 – an eight percent increase over 2010 and the largest increase since 1999.

“Retail was a lot of the big job losers and that’s not surprising because we had record sales last year so it doesn’t surprise me that retail is shedding those jobs [now],” says Kimberly Amadeo, the About.com U.S. Economy Guide.

Either way – it’s a blow to the market which also saw temporary hiring – generally a precursor to permanent hiring – taper off as well.

Continued growth in manufacturing and auto sales, however, seem to indicate that positive – albeit slow – growth will continue. Manufacturing gained 37,000 jobs – with a sizeable share of those jobs – about 1,200 – in auto part production while auto sales were up 13 percent in March.

“Automobile sector will continue to grow and each month has been higher than forecast and that translates into increased employment pretty rapidly,” says Howard Chernick, an economics professor at City University of New York’s Hunter College.

Though, on the whole, the numbers were disappointing, overall job and economic growth is still improving, with job gains from February being revised up.

“I always say that that the trend is your friend and the trend is still up,” says Amadeo.

Losses in retail and temporary hiring may just be hiccups in an otherwise sustainable recovery.

Adam Personnel, a New York staffing and recruitment firm, has had sustained demand for temporary staff according to Catherine Palmiere, president of the company, who also says that she doesn’t anticipate a significant slowdown any time soon.

Rebecca Flach, spokesperson for the Retail Council of New York State also cautioned against interpreting the slip in retail jobs as an ominous warning that the recovery has shifted into reverse.

“I don’t think it’s anything to be worried about at this stage, one month isn’t a basis for what’s going on with the recovery and economy,” she says.

Housing, however, continues to be a point of concern, as home values steadily decline and more housing stock floods the market. Historically a healthy housing market is a crucial components of a speedy and comprehensive recovery.

“I don’t see housing snapping back the way it has before and we’re still paying for this enormous bubble … and it’s a mistake that’s punishing the economy and will continue to do so for many months and maybe a year or so,” says Professor Chernick.

Home values dropped 3.8 percent across 20 cities, between January 2011 and January 2012 according to the Standard and Poor’s Case-Schiller Home Price Indices.

Chrysler and Co. Pump Out Another Strong Month for Autos

Smaller, fuel-efficient cars powered total vehicle sales in March, bolstering the resurgent American economy and accelerating the auto industry.

Chrysler sold more than 163,000 vehicles last month, leading the pack with a 34 percent increase compared to March 2011. The automaker, controlled by Fiat SpA, was the only member of the “Big Three” to exceed analysts’ expectations, according to Bloomberg. Ford reported its best March figures in five years, while General Motors’ sales increased by nearly 12 percent, after selling more than 100,000 vehicles that offer 30mpg.

In February 2009, the US economy slashed more than half a million jobs and car manufacturers hit rock bottom, selling an annualized rate of less than nine million cars. Since then, the automotive industry has risen from its ashes.

Carmakers sold more than 14 million vehicles, when annualized, for the past three consecutive months, a trend that will likely continue, said analysts. Booming sales are boosting the economy and are fueled on gasoline that is costing drivers nearly $4 a gallon, a 25 percent increase from the same month a year ago.

“The March results reinforce that the industry is regaining momentum,” said Tom Libby an automotive analyst at Polk. Two main influences including easier credit and high gas prices have buoyed sales. “Fuel economy and gas prices run counter to what people think, but these are actually helping the industry.”

Data on convertibles, an indicator that increases with higher frequency of sunny days, has not increased, mentioned Libby. Weather, therefore, has not caused an aberration in the market; gains in autos are genuine.

Consumer confidence, which peaked in March, and decreased unemployment, played key roles in the 1.4 million light vehicle sales reported last month. The 12.7 percent year-on-year increase resulted in the best March in four years and provided a positive harbinger for the industry, reported motorintelligence.com.

“The fact that March is one of the strongest months is really a litmus test for what is going to happen in 2012,” said Jessica Caldwell, senior automotive analyst for Edmunds.com. “If we have a big number in March, we will continue to be able to post good numbers throughout the year.”

Some were less optimistic about March. Total vehicle sales, while strong, still fell short of analysts’ estimates. With sales of over 15 million in February, car sales fell off in March. But February’s sales “should be read with an asterisk,” said Libby.

The 29th day of February, he said, put sales over 15 million. Without that “Leap Day,” sales for the past two months would have been more in line.

Cheaper credit is helping buyers.

In March, the average credit score dropped for those buying cars, said Caldwell and Libby, and more people than ever are able to finance their purchases with cheaper credit.

A divergent view holds that monetary policy is hampering auto sales. “I think if lenders could get more interest on their loans, they’d lend out more. At near zero interest rates,” Robert Brusca, president of Fact & Opinion Economics, said. Adding that car sales have not reached their potential. “You get a restricted supply of credit, not an increased supply of credit. If the fed let interest rates float up, you will probably get more lending. Automobiles are a credit industry. If you can’t get credit you can’t buy a car.”

Fed Chairman Ben Bernanke has repeatedly stated that he will keep interest rates near zero depending on how well the American economy fares throughout 2012.

A big test will come Friday when March’s unemployment rate is released. There are some risks, said Brusca, but “car sales could really ramp up if the unemployment rate goes down.”