On top of a strong economy, the driving forces are rising employment and wages, continued low interest rates and lower gasoline prices at the pump. NADA included a GDP forecast of 3.1% for 2015 in its assumptions. NADA’s projection noted that for new car sales to rise above 17 million units. It would require a ramp up in incentives and an increase in new-car purchases by millennial shoppers.
Other assumptions in the NADA forecast are as follows:
- Employment and wages: Over 200,000 jobs per month (their forecast is 242,000 on average for 2015), disposable income up 2.5% and corporate profits up 6.7%.
- Interest rates and the Fed: Federal Reserve to raise rates in 2015, with the Fed (funds) rate moving to 1% by October 2015, and further movements in rates expected during the second half of 2016. Also, auto loans rising 125 to 150 basis points by the end of 2015.
- Inflation: Expected to be tame.
- Oil prices: WTI crude to average $71 to $73 per barrel in the first half of 2015, rising to $83 for the second half average of 2015.
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Several other items not brought up by NADA’s forecast point to a strong auto market in 2015. Warren Buffett’s Berkshire Hathaway is acquiring the Van Tuyl auto dealership, and he has indicated he would like to use that as a platform to grow Berkshire Hathaway Automotive.
General Motors Co. (NYSE: GM) posted total retail sales for the first 10 months of 2014 of 1.83 million units, after struggling with recalls earlier in the year, as well as a 4.6% drop off in Cadillac sales. In the same period, Ford Motor Co. (NYSE: F) saw a 0.5% decline in its best-selling F-Series pickups as customers held off, waiting for the new aluminum models.
Regardless of what happens in the commodities markets, most participants are still operating that the growth region markets in the United States will not have severe layoffs or slowdowns due to lower oil prices. If that holds true, then $100 oil might not be a severe risk again.
Central bankers have talked down global growth in 2015, but they have maintained that growth factors will prevail in 2015 and beyond. Unemployment is expected to remain at or slightly under current levels in 2015.
Most industry groups have so far held off on making any grand projections for 2015. Maybe the weather will be a bit less volatile at the start of 2015 than it was at the start of 2014. Maybe.
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