Auto sales rebound and point to strong third-quarter GDP

By Jeffry Bartash

Falling interest rates likely to boost car sales

Sales of new cars and trucks rebounded in September in a sign that consumer spending was fairly robust in the third quarter, keeping the U.S. economic expansion on an even keel.

U.S. automobile sales rose at an annual rate of 15.7 million last month from 15.1 million in August, according to Ward's Intelligence.

The figure reflects how many new vehicles would be sold in the entire year if the same number were purchased each month as were sold in September.

Auto sales suffered a blow early in the summer from a major cyberattack that stymied the completion of sales. Yet even after the attack ended, dealers have struggled to boost sales in the face of high interest rates.

Auto companies have resorted to more discounts to lure buyers - with the prospect of falling interest rates set to give them another helping hand.

The Fed cut rates last month for the first time in four years in response to slowing inflation, and more reductions are on the way. Lower borrowing costs are likely to get more buyers into dealer showrooms, industry experts say.

"A combination of solid income growth and rate cuts will boost affordability and drive vehicle sales above 16 million next year," asserted Michael Pearce, deputy chief U.S. economist at Oxford Economics.

Car purchases play a big role in retail sales and overall consumer spending, the main engine of the economy. Rising car sales tend to be an indicator of a stable economy.

The current rate of sales could also drive gross domestic product, the official scorecard of the economy, to around 3% in the third quarter, economists say. That would be a very robust rate of growth.

The auto industry posted record sales of 17.5 million in 2016, but it hasn't come close to that level in the past five years.

-Jeffry Bartash

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10-01-24 1856ET

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