J.D. Power and Associates Reports: Strong Close Might Offset Mixed Start for May New-Vehicle Retail Sales

WESTLAKE VILLAGE, Calif., May 20 /PRNewswire/ -- After a wavering start to May new-vehicle retail sales, the end of the month is expected to benefit from a Memorial Day boost, according to J.D. Power and Associates, which gathers real-time transaction data from more than 8,900 retail franchisees throughout the United States.

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Retail Light-Vehicle Sales

May new-vehicle retail sales are expected to come in at 874,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.2 million units. Given the weaker start to the month, May's selling rate is expected to be down from April's selling rate of 9.6 million units. However, compared with May 2009, retail sales are projected to increase by 11 percent in May 2010. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

"Compared with April, incentives this month are flat at $2,800, which is contributing to the slower sales pace," said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. "However, with the unofficial start to summer approaching, consumers are more inclined to consider purchasing a new vehicle, and it's likely that Memorial Day sales incentives will generate an even stronger close for May."

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Total Light-Vehicle Sales

May fleet sales are expected to increase, making up for the softer retail environment and pushing the total SAAR to 11.3 million units, above April's selling rate of 11.2 million units. Fleet volume is forecasted to total 205,000 units for the month—up 52 percent from May 2009. Total light-vehicle sales for May are projected to come in at 1,079,400 units—an increase of 17 percent, compared with one year ago.

Sales Outlook

Positive first-quarter GDP growth and favorable employment numbers suggest that the economy is performing slightly ahead of expectations. In addition, robust product activity is expected to drive consumers into showrooms, and fleet volume is being replenished from the low levels of 2009. As a result, J.D. Power and Associates is increasing its sales forecast slightly to 11.8 million units (from 11.7 million units) for total sales and to 9.7 million units (from 9.6 million units) for retail sales.

North American Production

The pace of recovery in North American vehicle production continues, with April 2010 volume up 46 percent from April 2009 to 957,000 units. The significant year-over-year increases are expected to continue through the remainder of the second quarter before starting to slow in the second half of 2010 to a more sustainable level of growth. The second quarter of 2010 is projected to be up 60 percent from the same period in 2009, with volume at 2.9 million units.

The outlook for North American production in 2010 is improving for a second consecutive month. Light-vehicle production is forecasted to be at 11.2 million units for the year, up 32 percent from 2009.

Even as production increases, inventory levels remain in check, and given the diligent balancing of supply with demand, 2010 is expected to end with inventory under a 60-day supply—compared with a recent peak of 118 days in January 2009. Capacity utilization is also benefiting from the production increases and should improve to 64 percent from 47 percent in 2009.

"The increase in production levels is a much-needed buffer for the struggling automotive supply base that survived the debacle of 2009," said Schuster. "However, given the cost cuts that were made last year, there are some concerns that there may be struggles with some suppliers to meet the increasing demand for parts."

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is a global marketing information services company operating in key business sectors including market research, forecasting, performance improvement, Web intelligence and customer satisfaction. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global information and education company providing knowledge, insights and analysis in the financial, education and business information sectors through leading brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2009 were $5.95 billion. Additional information is available at http://www.mcgraw-hill.com/.

J.D. Power and Associates Media Relations Contacts:

John Tews; Troy, Mich.; (248) 312-4119; [email protected]

Angela Bianchi; Troy, Mich.; (248) 312-4729; [email protected]

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power and Associates. www.jdpower.com/corporate

SOURCE J.D. Power and Associates

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