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Auto Sales See Best Month in '03

August 28, 2003

In a fresh sign of growing consumer optimism, August is shaping up to be the best month this year for U.S car and light truck sales, say

analysts and auto dealers. Industry analysts predict August sales will reach an annualized rate of 18 million to 18.2 million vehicles, according to the Detroit News.

That's less than last August's banner sales rate of 18.6 million units, when automakers pumped up incentives and zero-percent financing offers. But it would be the strongest monthly showing since December, the News said.

The strong demand -- coming after solid July sales -- is another sign the second-half turnaround auto industry executives have been anticipating may be gaining traction, according to the News.

On August 27, the Conference Board reported that its widely watched Consumer Confidence Index rebounded in August after a dip in July. Car buyers braved sweltering temperatures to take advantage of generous close-out deals on 2003 models before the new model year, which traditionally begins in September. Demand was strong across most vehicle segments, but particularly for pickups, sport utility vehicles and luxury cars, dealers report.

Though rising incentives will further erode automakers' profits in the United States,

financial analysts say the August sales boom will bolster the companies' performance by cutting inventories back to normal levels and boosting production rates, according to the News.

National Automobile Dealers Association (NADA) Chief Economist Paul Taylor said he expects a strong performance in August, but points out that there are some specific dynamics driving August sales. Some lush incentives are driving 2003 model sales.

For September, Taylor points out that fairly strong incentives on 2004 models will be important, as well as "catching up" on '04 production lost to the power outage, in order to assure a full selection of new models as '03 vehicles sell out early.

Some of the August rush is caused by consumer concern that interest rates will be

higher during the fourth quarter, Taylor said.

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