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By Robert Johnson, CFA | 04-13-2016 12:00 PM

Auto Sales Set to Downshift

A closer look at yearly auto-sales figures reveals that the Great Recession has played a big part in the industry's volatile demand, says Morningstar's Bob Johnson.

Bob Johnson: This week's chart focuses on U.S. auto sales, an important determinant of U.S. economic strength and a key employment sector.

If you look at the graph, you can see that auto sales peaked in about 2005, at just about 17 million annualized units. You can see we had a slow decline into the Great Recession, and then the collapse when sales fell by more than 21% in 2009. You can see we went down to 10.4 million units at the worst period. Since then we've begun a slow but steady recovery, and by 2015 the actual auto purchases were just about back to where they were in 2005. So, a lot of what we've seen is just recovering what we lost in the recession, not any kind of great new growth.

Take a look at the overall growth rates, and you can see kind of a similar situation, where growth was relatively OK and then fell apart in the Great Recession. And then we've had these really great-looking growth numbers for auto sales that have everybody so excited. For example, in 2012, we grew as fast as 13%. Well, that was related to the recovery, not to some great new demand for automobiles, and since then we've fallen back a little bit and growth in 2015 was about 5.5% or so.

Well, now, looking ahead, we don't see any particular reason for automobiles to grow any faster than overall population growth and maybe a little business growth. So, we expect 1% to 3% growth out of the auto industry in the years ahead, not the same big 13% we got in 2012. Nothing to worry about, but again, a slower growth rate than people have been anticipating.

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