Beige Book: Dealers Show Healthy Sales in Most Districts

Dealers are enjoying more robust results throughout much of the country, according to the latest Beige Book report from the Federal Reserve. The Fed reported that nine of the 12 districts showed improvement in auto sales.

Moreover, three of those districts (Philadelphia, St. Louis and Kansas City) are projected to see this growth remain for the rest of the year.

“Sales of new automobiles and light trucks rose in nine districts during the reporting period, with several districts indicating that vehicle inventories are now at appropriate levels,” the Fed stated.

The report examined the period from early- and mid-October through mid-November.

“Dealers expect new vehicle sales to continue rising through year-end in the Philadelphia, St. Louis, and Kansas City districts,” officials added.

 Starting with the First District, the Fed broke down results from each of its 12 districts.

There was no auto-specific information on the First District offered, but the Fed did note that the retail market, in general, was largely “mixed” during autumn.

“Year-over-year same-store sales range from decreases in the low single digits to increases in the low single digits, with several contacts reporting flat sales,” officials noted.

“The majority of contacted retailers expect a highly promotional holiday shopping season yielding modest sales increases,” they added. “Inventory levels are mixed, but generally in line with expectations.”

Next up was the Second District. In this area, auto sales are still “fairly good,” the Fed shared.

Giving the example of the Rochester, N.Y., area, the Fed indicated that October sales climbed about 12 percent year-over-year. The most recent data from November indicates a 5- to 10-percent gain from 2009.

Officials noted: “Low inventories are no longer a problem because auto production has recovered to a more normal level. Retail credit conditions have continued to ease, and wholesale credit markets have shown steady improvement.”

Philadelphia

Dealers here have enjoyed stronger sales and profits compared to the previous reporting period, and for the most part, they have found their inventory to be “appropriate” based on the sales rate, according to the Fed.

“Dealers expect sales to rise until the end of the year, but some expressed concern that the sales pace might slip during the first quarter of 2011 after the better than expected results of 2010,” officials pointed out.

Moving over to the Fourth District, October showed sequential new-vehicle sales gains for the majority of stores, and dealers are anticipating “seasonal trends” to dominate the winter, the Fed shared.

Volume is expected to show a year-over-year increase.

“New-car inventories rose during the past few weeks. Used-vehicle purchases are flattening out since our last report,” officials noted. “Little change in lending standards was reported, while credit pricing remains very competitive. We heard a few reports of incremental hiring at dealerships.”

In the Fifth District, results varied between dealers, according to the Fed.

“While an automobile dealer in South Carolina attributed falling sales to the high unemployment rate in his area, a central West Virginia dealer said that he had ‘a real good month,’” the Fed pointed out.

Continuing on to the Sixth District, the Fed discovered that dealers and other retailers fared relatively well.

The report noted: “Most retail stores and auto dealers reported that traffic and sales increased in October through mid-November. The outlook among retailers was positive and expectations for the holiday season were cautiously optimistic. Retailers noted that customers remain quite value conscious and responsive to price changes.”

In the Seventh District, incentives helped push a stronger auto market. Moreover, dealers felt better about inventory levels, even though there still was tightness for a few contacts on hot-sellers.

“Auto dealers indicated that inventory had returned to more comfortable levels, although a few again cited a limited supply of stronger selling models,” the Fed indicated.

Moving on to the Eighth District, October and the early part of last month showed average sales increasing on a year-over-year basis, the Fed reported.

In fact, sales improved for more than half (54 percent) of the contacts. Less than a third (29 percent) incurred sales decreases, while 17 percent reported static sales.

“About 29 percent of the car dealers noted that used-car sales had increased relative to new-car sales, while 8 percent reported the opposite. Also, 20 percent reported an increase in low-end vehicle sales relative to high-end vehicle sales,” officials noted.

“Roughly 17 percent of contacts reported that their inventories were too low. A similar number of contacts reported that inventories were too high,” they added.

Looking ahead, dealers appear to have a rather promising outlook for the remainder of 2010, officials noted.  

“About 58 percent of the car dealers expect sales for the rest of the year to increase over 2009 levels, but 29 percent expect sales to decrease,” the Fed stated. “The remaining 13 percent expect sales to be similar to last year’s.”

Next up was the Ninth District. There has been stronger overall consumer spending here, according to the Fed, which offered up an example of one area that is showing strength in the luxury auto market.

“Luxury car dealerships in the Minneapolis-St. Paul area reported strong sales during the past few months,” the Fed pointed out.

Moving on, 10th District dealers have seen some modest sales gains, following decreases in the prior period, according to the report. Trucks and used vehicles have been particularly healthy, the Fed shared.

“Dealers anticipated demand would continue to strengthen through year-end, and some planned to hire sales staff and service technicians,” the Fed pointed out.

In the 11th District, the decline in auto sales was stronger than seasonally expected, according to the Fed.

On a positive note, despite the increase in inventory, dealers found the level to be “healthy.”

“Automobile sales were slightly weaker over the reporting period by more than normal seasonality would suggest,” the Fed shared.

Looking ahead, officials added: “A typical slowdown in sales is expected heading into the holiday season, but the outlook for next year is cautiously optimistic, with most contacts predicting modest growth in sales.”

Finally, the 12th District showed even more sales gains, thanks primarily to increased light truck and van demand, according to the Fed. There were rather healthy used sales, as well, officials pointed out.

“New domestic and imported automobile sales improved further, spurred largely by rising demand for light trucks and vans. Sales of used vehicles were strong, but contacts noted that supply remained tight,” the Fed noted.