The Wall Street Journal reports U.S. Car Sales Fell Last Year, the First Annual Decline Since Financial Crisis.

Full industry results for December, due out later Wednesday, are expected to show sales declined about 6% from a year ago, according to J.D. Power. That would result in a 17.2 million vehicle sales for 2017, among the five strongest years ever but off 2% from the record 17.6 million sold a year earlier.

GM expressed optimism that tax cuts and solid underlying economic conditions will keep sales at a healthy level.

“Many consumers will see their take-home pay rise because of tax reform,” GM chief economist Mustafa Mohatarem said in a statement. “That will keep the broad economy growing, and help keep sales at very healthy levels even as the Fed increases interest rates.”

Saved by the Hurricanes

Two things saved the year for automakers: steep discounts and hurricanes.

Reuters comments on the discounts: "Consumer discounts aimed at moving vehicles off dealer lots will likely remain a concern for the industry. Discounts of more than 10 percent of a vehicle’s sticker price can hurt resale values, in turn weighing on new vehicle sales. In December, auto consultancies J.D. Power and LMC estimated discounts had topped 10 percent for the 17th time in the last 18 months."

Millions of cars were damaged in the hurricanes. GM and other dealers were sitting on extremely high inventories and not even steep discounts helped reduce inventories.

Hurricane replacement, a one-time artificial boost to sales, saved the year.

GM and Ford think the tax cuts will lead to another strong year in 2018. Count me among the sceptics.

Mike "Mish" Shedlock

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