Early Votes Are In: U.S. Auto Sales a Downer in October

Here's another early signal that U.S. auto sales in October could be worse than a truly terrible September: J.D. Power and Associates said on Oct. 15 that the seasonally adjusted annual selling rate, or SAAR, for October will "probably" be below 12 million.

In turn, if the October sales rate is "substantially" below 12 million, that could prompt J.D. Power to cut its 2008 sales forecast for the third time in less than a month. For now the market research and consulting firm's full-year 2008 forecast is 13.6 million, versus about 16.1 million in 2007. That would be a bigger one-year drop this year, than the drop from 1990 to the 1991 recession.

Based on sales history, SAAR attempts to project how many vehicles would be sold in a full year, at the rate of sales for a single given month, allowing for seasonal variation among months. You can't just divide annual sales by 12 and get an accurate forecast for each month. Conversely, you can't simply multiply a given month's sales by 12 and get an accurate full-year forecast.

For instance, January and February are typically slow months for auto sales. Monthly sales generally pick up in the spring, and then peak in the late summer or early fall. That's followed by a smaller peak in December. So a relatively paltry number in January could indicate a good year, or a relatively big sales number in September could mean an off year, depending on how those months stack up against historical months.

September 2008 was a bad month in both absolute and relative terms. According to AutoData, the SAAR last month was about 12.5 million, down from about 16.2 million in the year-ago month. Unit sales were down 26.6 percent, to just under 1 million.

If J.D. Power cuts its 2008 forecast again, that could also lead to cutting its sales forecast for 2009, currently at only 13.2 million, the lowest since 1992.

Separately, on Oct. 10, edmunds.com said that online shopping on its consumer web site indicated October sales could be worse than September.