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Auto Sales Help Boost U.S. Economy

May 06, 2013

A continuing increase in auto sales, along with a housing recovery that is finally beginning to pick up steam, have contributed to economic growth in the first quarter of 2013, according to a recent survey conducted by the Federal Reserve. The survey suggests the economy has been performing better than hiring and consumer spending data would seem to indicate.J.D. Power and Associates and LMC Automotive predict that April auto sales will rise 7% from a year ago to 1.3 million units, translated to a seasonally adjusted rate of 15.2 million vehicles.While pent-up demand continues to build, it is not aggressively impacting auto sales just yet, according to Citi Investment Research. The pent-up demand is often cited as the primary reason for recent growth in auto sales, but Citi Investment says that strong sales are more a result of a recovering housing market and households that can afford multiple cars.Vehicles on the road have an average age of 11.2 years, according to data from market researcher R.L. Polk & Co., more than two years older than the average a decade ago.The increased quality of many new vehicles, combined with an increase in cost has driven the average length of ownership for a new vehicle from 47.5 months in 2001 to nearly 72 months in 2012. This average age of the vehicle fleet is expected to begin dropping over the next few years, according to industry analysts.As the economy continues to grow and add jobs and lease deals become more attractive, vehicle sales will move upward and the full impact of the pent-up demand will be felt.