July Autos Sales Up, Yet Economic Concerns Persist

U.S. automakers reported higher sales for the month of July, but the ongoing weak economic environment doesn't bode well for the sector.

The big three are all seeing year-over-year sales increases, and executives are predicting that they should see a solid finish to 2011.

Monthly car sales figures are considered as one of the yardsticks to measure consumer demand and their ability to spend in a tight economy.

General Motor's (NYSE:GM) U.S. sales rose 7.6 percent to 214,915 vehicles in July, driven by strong demand for its fuel-efficient Chevrolet Cruze and its crossover and pickup offerings.

Chrysler's July sales at U.S. rose 20 percent to 112,026 vehicles, helped by its Jeep brand whose sales increased 46 percent. Sales of Chrysler branded vehicles advanced 5 percent.

"Our perspective is the market is still bullish. Fuel prices have not hit as strong as we thought," said Dan Knott, Chrysler's Senior VP of Purchasing & Supplier Quality.

On the other hand, Japanese automakers Toyota and Honda Motor saw their sales drop over 20 percent due to the March earthquake in Japan.

Meanwhile, U.S. sales at Ford (NYSE:F) improved 8.9 percent on strong demand for the Fiesta, Escape and Explorer models. It sold 180,865 vehicles in July, 6.8 percent less than were sold in June. However, sales of the Lincoln brand surged 40 percent, as the company continues to focus on bringing Lincoln back to prominence as a preferred luxury brand.

For the month of July, U.S. light vehicle sales were 12.2 million units, beating consensus of 11.8 million units.

"Sales have started to rebound from May/June levels as inventory shortages are subsiding," CIBC analyst Michael Willemse wrote in a note to clients.

However, he added that economic concerns may weigh on the outlook for the second half of 2011.

The reduced forecasts from GM and Ford may be an indication of weak economy. Both GM and Ford reduced 2011 U.S. auto sales forecasts slightly to 13.0 million from a range of 13.0-13.5 million.

However, GM expressed optimism and said sales will improve in the second half.

"There are people who put off vehicle purchases because of uncertainty about fuel prices, vehicle availability and the economy. As these conditions improve in the latter half of this year, many of these buyers will return to the market," said Don Johnson, head of U.S. sales at GM.

However, Johnson did warn that he expects total industry sales to come in at the low end of the company's previously forecast range of 13.0-13.5 million cars in 2011.

Willemse, who still expects light vehicle sales to rise towards 13.0 million in third quarter and fourth quarter, maintained his 2011 U.S. auto sales forecast at 13.0 million.