Analysis from JD Power and LMC Automotive suggests that the final month of the calendar year will see a strong finish after a slow start.

LMC estimates that US consumers are expected to spend more than US$34bn on new vehicles in December, a historic high for the month. The record breaking level of spending reflects record transaction prices combined with strong retail sales.

New vehicle retail sales in December are expected to reach 1,134,600, a 4% increase from December 2012 (adjusted for one less selling day in December 2013). The December seasonally adjusted annualised rate (SAAR) for retail sales is projected at 12.7m, a decline from 13.4m in November but more than 660,000 stronger (5.5%) than in December 2012. Additionally, average new vehicle retail transaction prices in December are expected to reach US$30,500, up US$500 (2%) from a year ago.

"Strong consumer demand in December is the culmination of another strong year for the automotive industry," said John Humphrey, senior vice president of the global automotive practice at JD Power. "Retail sales in 2013 are expected to reach 12.8m, with consumer spending reaching a record US$375bn, a US$40bn increase from 2012."

Total light vehicle sales in December are expected to reach 1.4m, a 4% increase from December 2012.

Total light vehicle sales in 2013 are set to finish at 15.6m units, while the LMC Automotive forecast for retail light vehicle sales remain at 12.8m units. LMC Automotive has increased its total and retail light-vehicle sales forecasts for 2014 each by 100,000 to 16.2m and 13.3m units, respectively.

"The budget deal in Washington is helping fuel a higher level of optimism for the economy and auto sales in 2014," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "December sales faced some challenge early in the month, with some sales that pulled ahead in November and winter storms, they have rebounded well, and the year ahead is set up to edge new vehicle sales closer to pre-recession levels."

North American Production

Vehicle production in North America year-to-date through November has increased 5% from the same time frame in 2013, with nearly 700,000 units of additional volume. Even as inventory has increased, production volume in November remained strong at 1.4m units, a 4% increase from November 2012.

The Detroit Three continued to build inventory at a rapid pace, and their combined days' supply climbed from 87 days at the beginning of November to 93 days by the end of the month. Schuster explained that, while it is normal for manufacturers to build up inventory to meet year-end demand, the level is slightly ahead of expectations, and doing so this late in the year has the potential to affect production in the first quarter of 2014. In contrast, European and Asian manufacturers all maintained or reduced their inventory levels in November.

Given the unexpected Detroit Three production push in November, LMC Automotive has increased its volume outlook for 2013 North American production to 16.2m units. First quarter 2014 production is expected to grow to 4.2m units, a 4 % increase, compared with the same period in 2013. Full year production in 2014 is forecast at 16.6m units, which is a 3% gain on this year's estimate.