May auto sales disappoint as demand slows?

CNBC's Phil LeBeau reports the sales numbers on General Motors, up 10.9% vs. 11.4% estimate, while Toyota reported sales up 87.3% vs. 89.5% estimates.

By msnbc.com news services

DETROIT ? Disappointing U.S. auto sales in May from General Motors, Toyota and Chrysler suggested industry demand slowed from the strong pace of the first four months.

The weaker-than-expected sales, which included mixed results from Ford, were a bad sign when combined with an anemic U.S. jobs report on Friday.

"Since our last monthly sales call over the last 30 days or so, the economic indicators came in just a little softer than in the first quarter," Ford senior economist Jenny Lin said on a conference call.

GM's sales rose 11 percent, while U.S. May sales at Chrysler and Toyota rose 30 percent and 87 percent, respectively, but all the results fell short of expectations. Ford's sales increased almost 13 percent, which was below what Barclays and Edmunds.com expected but better than estimates by some other firms.

Nissan's sales rose 21 percent, but the total at the Japanese automaker also fell short of expectations.

Economists polled by Thomson Reuters expect an annual sales rate for the month of 14.5 million vehicles. The rate topped 14 million in each of the first four months of the year, including 15.1 million in February.

Some industry officials expect the May rate to be lower as warmer weather earlier in the year pulled demand forward. In addition, falling prices at the fuel pump have reduced pressure on consumers to get rid of gas-guzzlers and buy more fuel-efficient cars.

GM said it expects the May light-vehicle selling rate to finish around 14 million, while Ford forecast a final number, including medium and heavy-duty trucks, in the mid-14 million range. Medium and heavy-duty trucks typically account for about 300,000 sales annually.

Auto sales have been one of the bright spots in the economy for several months and the monthly sales results offer an early snapshot of consumer demand.

Shaky recovery
Sales have shot up this year despite cooling consumer confidence and mixed economic data that illustrates how shaky the recovery has been over the last three years. On Friday, the U.S. Labor Department reported job growth in May that was the weakest in a year, and employers added far fewer jobs in the prior two months than previously reported.

"During any recovery you see some signals pointing upward, some neutral, some down," said Jonathan Browning, head of Volkswagen AG's U.S. operations. "While there'll be some short-term fluctuations in those indicators, those underlying trends remain in a positive direction."

One factor fueling the growth in auto sales has been Americans' increasing need to replace their aging cars and trucks, which are now a record 10.8 years old on average.

Higher fuel prices in the first quarter prompted some consumers to swap older, less fuel-efficient models to lock in fuel savings. According to Swiss bank UBS, 63 percent of dealers said higher gasoline prices increased demand in the first quarter.

With gas prices falling again, the pace of new-car sales may moderate in the second and third quarters, but the underlying consumer appetite for new cars and trucks as a result of pent-up demand remains strong, UBS analyst Colin Langan said.

GM's May sales increased to 245,256 vehicles from 221,192 in the same month last year. Full-size pickup truck sales rose 23 percent.

Ford's sales rose to 216,267 vehicles from 192,102 in the same month last year. Trucks saw sales rise 21 percent. The company also said it plans to build 690,000 vehicles in the third quarter in North America, up 5 percent from the same period last year.

Toyota sales rose 87 percent to 202,973 vehicles. Sales at Chrysler, controlled by Italy's Fiat, rose to 150,041 vehicles from 115,363 in the same month last year. VW said its VW brand sales rose 28 percent to 38,657 vehicles.

GM shares were down 3.2 percent at $21.50 and Ford shares were down 3.6 percent at $10.18 on Friday morning on the New York Stock Exchange. Wall Street stocks were broadly lower on the sour U.S. jobs report.

?Reuters contributed to this report.??

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