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SOUTHFIELD, Mich. – The housing market is still on shaky ground. Unemployment is 7.8 percent. But the one sector of the U.S. economy that’s marching steadily back is the one that once seemed the weakest: automotive.
The auto industry in September reached a milestone that few other sectors can claim. Automakers sold cars and light trucks at an annualized rate of 14.9 million, taking into account seasonal adjustments, according to researcher Autodata Corp. That’s the best pace since March 2008, before the failure of Lehman Brothers Holdings.
Consumers weary of driving 11-year-old vehicles with poor mileage are increasingly trading in their jalopies for new, fuel-efficient models. Small-car sales climbed by 50 percent last month as gasoline prices held above $3.75 a gallon. Even pickup truck sales, linked to the nascent housing industry, are up this year.
“Autos are the bright, shining star in the economy,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “It’s a key cog in the economic wheel. If we didn’t have the automotive recovery, the overall economic recovery would be much weaker.”
While U.S. auto sales are on pace to rise by at least 10 percent for the third consecutive year, this isn’t as good as it gets, said Diane Swonk, chief economist with Mesirow Financial in Chicago. The car market will kick into higher gear once consumers see positive equity in their homes, and the housing market starts humming again. The United States averaged 16.8 million annual deliveries from 2000 to 2007.
“The auto recovery is still not anywhere near what anyone would expect, given the number of new drivers and the level of pent-up demand,” Swonk said. “But it’s a start, and not all sectors have that. There will be a big difference when people’s largest asset – their home – is moving up in value.”
Toyota led with the biggest gain in September as sales surged by 42 percent – topping the 36 percent gain that was the average estimate of eight analysts surveyed by Bloomberg. Chrysler and Honda also beat estimates.
The U.S. sales rate exceeded the 14.5 million pace that was the average estimate of 16 analysts in Bloomberg’s survey. The rate is the best industry sales pace since 14.95 million in March 2008, according to Autodata in Woodcliff Lake, N.J.
Honda, rebounding along with Toyota from last year’s supply shortages caused by the March 2011 earthquake and tsunami in Japan, boosted sales in September by 31 percent, topping the 26 percent average estimate of eight analysts. Nissan’s deliveries slid by 1.1 percent, better than the average estimate of a 2.1 percent decline.
The United States averaged a 14.5 million annualized sales rate in the third quarter, the fastest since the 15.3 million pace set in 2008’s first quarter, according to Autodata.
Confidence is growing among automakers, including those that required bankruptcies and bailouts in 2009 to survive.
“As we look forward, we continue to be encouraged,” Kurt McNeil, vice president of U.S. sales for General Motors, whose predecessor company went bankrupt in 2009, said in a conference call.
GM deliveries rose by 1.5 percent, less than analysts’ average estimate for a 2.8 percent increase. Chrysler sales last month rose by 12 percent, to 142,041 vehicles, for its 30th straight gain. Deliveries of the Dodge Dart sedan, introduced in June, climbed by 72 percent from August, to 5,235.
Three years ago, U.S. automakers would have seemed the least likely to be leading the economy. Yet the bankruptcies at GM and the predecessor of Chrysler, as well as Ford Motor Co.’s reorganization, have made those companies strong and able heading into the fragile economic upturn, Zandi said.
“The auto industry came close to death’s door,” Zandi said. “Today, the industry is on sounder ground. These are different companies now, their cost structures are lower, they're very competitive, they have good products. That has contributed to the strength of the recovery.”
Automakers have capped a role reversal from the depths of the recession, when they were destroying jobs and wealth. Now the U.S. auto industry is showing how domestic companies can recover from even the most debilitating setbacks, Zandi said.
“People had given up on the auto industry as a global competitor; they thought they’d never get their cost structures in line,” Zandi said. “If there’s any good that came out of the Great Recession, it’s that our companies are very competitive. And the auto industry represents that better than any other.”