IRVINE, Calif. — Kelley Blue Book (KBB) said yesterday that it expects new-vehicle sales to surpass 1.05 million units this month, which means the industry would be pacing at a 13.8 million seasonally adjusted annualized rate (SAAR) — a 6.4 percent improvement from the year-ago period.

Bolstering the vehicle information site’s outlook are increased inventory levels, improved access to credit, attractive finance offers available to consumers and one additional selling day due to the leap year, officials said. New-vehicle sales have remained above 13.6 million SAAR since November 2011, but KBB said that it believes the annualized sales pace will slow after April, as pent-up demand is satisfied from Toyota and Honda's inventory shortfalls.

"From a pure volume perspective, in the months ahead sales will continue to exceed last year's figures, but there may be more volatility this year from month to month than in 2011," said Alec Gutierrez, senior market analyst of automotive insights for KBB. "Sales were remarkably flat from May through November 2011, due to the production woes faced by Toyota and Honda. Now that they are producing vehicles at full capacity, a return to traditional seasonal patterns is likely through 2012." 

Consumers shopping in February and March will find an improved selection of vehicles available as a result of increased production in January, according to KBB. Manufacturers ramped up production in anticipation of President's Day sales promotions and the onset of the spring selling season beginning in March.

As of Feb. 1, there were nearly 2.5 million vehicles available for sale on dealer lots — equivalent to a 66 days' supply of vehicles overall, an improvement from the 52 days' supply of vehicles available as of Jan. 1. The most significant inventory gains came from General Motors, Ford and Chrysler, each with greater than 80 days' supply of vehicles available for consumers.

Touting a 50 days' supply are Toyota, Honda and Nissan, while Hyundai and Kia only have a 30 days' supply of vehicles overall, according to KBB. In the next month, car shoppers are expected to be able to negotiate savings by focusing on domestic vehicles, given the abundant supply currently available for sale. According to Autodata, domestic manufacturers spent more than $1,000 per unit more on incentives in January compared to their Japanese and Korean counterparts, a trend KBB expects will continue in February.

In terms of year-over-year growth, KBB said that it projects subcompacts to lead all other segments, especially with fuel prices surpassing $3.50 per gallon nationally. 

"Although traditionally viewed as a budget segment reserved for those consumers willing to accept fewer amenities, cheaper materials and less than an awe-inspiring driving experience, today's subcompacts compare favorably to many compacts or mid-size sedans," said Gutierrez.  "The Nissan Versa, Chevrolet Sonic, Ford Fiesta, Hyundai Accent, Honda Fit and Toyota Yaris all are excellent examples of either all-new or redesigned products that many consumers would be happy to call their own."

The mid-size category was a strong performer in January, and KBB said that it anticipates February will be another solid month for the Camry-led segment. The Toyota Camry topped sales gains in January on the strength of its 2012 redesign.

Rising fuel prices and a slow economic recovery both stand as potential road blocks to continued improvements in new-vehicle sales, KBB noted. Oil prices closed at a nine-month high of nearly $105 on Feb. 20, while fuel prices have continued to climb for the past 60 days. Gas prices are up nearly 40 cents per gallon year-over-year and have increased steadily since late December. Although fuel prices remain high, current projections by the Energy Information Administration (EIA) place average fuel prices in 2012 only slightly above the highs experienced in 2011. 

If conflict in Iran is avoidable, KBB said that it is hopeful that fuel prices will remain below the $4 highs of last year. In the worst case scenario, high fuel prices could slow the pace of the economic recovery and vehicle sales along with it.

The pace of the U.S. economic recovery remains very slow, and according to a recent forecast published by the Congressional Budget Office (CBO), the United States can expect much of the same through at least 2013. According to CBO estimates, the official unemployment rate, currently at 8.3 percent, will increase to 9.2 percent by the fourth quarter of 2013. In terms of overall economic output, Gross Domestic Product (GDP) is expected to show an annual increase of 2.2 percent in 2012, while 2013 will bring an even smaller 1.1 percent gain in GDP overall.  Given the expectations for weak economic growth during the next several years, KBB said that it expects the pace of the new-vehicle sales recovery to slow.

For more information, visit www.kbb.com.