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August Sales Ride the C4C Wave

September 15, 2009

After four straight months of declines, retail sales rebounded in August, but not just because of the federal Cash for Clunkers (C4C) program.

According to the U.S. Census Bureau, retail sales rose 2.7 percent in August, well above the 2 percent increase analysts had predicted. Motor vehicle sales, riding the C4C wave, jumped 10.6 percent.

Sales excluding motor vehicles increased 1.1 percent, and sales excluding motor vehicles and gasoline rose 0.6 percent.

“Even excluding the strong growth in motor vehicle sales, which was a result of the successful ‘Cash for Clunkers’ program, this significant increase in consumer spending shows that the Recovery Act and President Obama’s other economic initiatives are succeeding in putting the brakes on the recession,” U.S. Commerce Under Secretary for Economic Affairs Rebecca Blank said. “Accelerated stimulus spending in the second half of this year will create jobs and further stimulate our economic recovery.”

While the C4C program, which launched on July 27, did boost sales in August, some analysts wonder what the impact of the program will be on consumers who took advantage of the program and traditional retail sales.

“Many Americans who traded in their vehicles have become saddled with monthly car payments, which reduces the amount of money they’re able to spend in other areas,” said Rosalind Wells. “As a result, it remains to be seen how the ‘Cash for Clunkers’ program will impact traditional retail sales.”

In a survey conducted shortly after C4C ended on Aug. 24, CNW found that 17 percent of the 1,000 participants of the C4C program had “some” or “serious” doubts about making a new-vehicle purchase. Typically, in a non-C4C environment, buyer’s remorse hits roughly 6 to 9 percent of new-vehicle buyers within a month, according to CNW Purchase Path research.

“The primary reason (for those doubts): They are now facing a $275 to $350 per month car payment that didn’t exist prior to acquiring the car or truck,” wrote CNW’s Art Spinella. “That amount, they say, could negatively impact the total family budget more than expected prior to buying the new vehicle.”

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