Motor Industry Still Feeling Effects from Japan Tsunami

Toyota Motor Corp. and Honda Motor Co. are speeding returns to normal production after the March 11 earthquake and tsunami idled factories and created shortages of parts. The slowdown in May sales came about because limited supply of fuel-efficient cars like Toyota’s Prius lifted prices and curbed purchases.

“Consumers were being told so dramatically after Japan that there’s going to be a shortage of cars, but this is going to be a temporary situation and so many of them will just wait,” said Alan Baum, principal of industry consultant Baum & Associates, who predicts 13 million auto sales in the U.S. for 2011. “To the extent May is a reasonably poor month, I’m not going to get carried away and say that’s going to transcend through the rest of the year.”

U.S. sales of cars and light trucks may rise to 13 million this year, the average of 16 analysts’ estimates compiled by Bloomberg. That would be the most since 13.2 million in 2008.

Average U.S. gasoline prices dropped for 14 straight days since May 11 to $3.80 a gallon for regular unleaded, according to AAA. Prices earlier in May were at the highest level since 2008, reducing demand as the country’s vacation season started.

The earthquake in Japan may result in 3 million to 3.5 million units of global production that will be lost or deferred into next year, according to researcher IHS Automotive. Worldwide light-vehicle production may rise to 73.7 million units this year from 71.9 million in 2010, according to IHS.

Toyota, which built 45 percent of its cars in Japan last year, may lead declines among major automakers with a 27 percent drop in May deliveries, the average of three estimates. Honda Motor Co., the second-largest Japanese automaker by U.S. sales, may say sales fell 25 percent, the average of three estimates. Nissan Motor Co. deliveries may decrease 7.3 percent, the average of three estimates.

“Predominantly this is a supply issue,” George Magliano, a New York-based senior economist for IHS Automotive, said in a telephone interview. “The auto market was developing considerable momentum coming into this month before issues related to Japan.”

Automakers benefiting from their Japan-based rivals’ supply constraints may be led by Hyundai Motor Co. and Kia Motors Corp. Their combined U.S. sales may pass Toyota for the first time, according to Santa Monica, California-based TrueCar.com. Deliveries for Hyundai and Kia may surge 43 percent in May to 115,434, behind only General Motors Co. and Ford Motor Co., according to the auto pricing website.

Toyota, the world’s largest automaker, has said it expects production in North America to return to about 70 percent of normal levels beginning in June, from about 30 percent in May. Honda forecast last week that North American production will return to 100 percent in August for all models except Civic small cars, and said May 17 that global production will return to normal before the end of the year.

 

High Gas prices likely dampened May retail sales

U.S. retailers are expected to show a small increase in May sales, as high gas prices softened spending and  consumer demand for summer clothing and other discretionary items.

Analysts on average are expecting a 5.3 percent increase in May sales at stores open at least a year, according to Reuters. That compares with gains of 8.9 percent in April, when sales were fueled by a late Easter holiday, and 2.6 percent in May 2010, when many experts feared a double-dip recession.

Experts debate to what extent will the jump in fuel prices continue to take the edge off of growth, but as we move into several months of high fuel prices, we’re starting to see some effects in May.

Although U.S. gasoline prices fell to an average of $3.90 per gallon in the latest Lundberg Survey, Gas hit $4 per gallon earlier in May and has been above $3 per gallon for most of the year. High fuel prices affect shopping behavior. The longer those fuel prices persist, it’s more likely to affect the average household budget.

U.S. consumers turned more pessimistic in May, according to an index of consumer sentiment, while home prices fell back below crisis-era lows in March, as the economy that continues to show signs of a struggle.

May is not  a big month for shopping, it falls after the Easter holiday and before the back-to-school season. Retailers have been struggling with a slow job recovery that has kept spending levels low, especially for lower-income households.

The weather across much of the country was cool and rainy; many retailers also blamed bad weather for lackluster sales in the first quarter.

The biggest May sales increase, 7.3 percent, is expected from discount stores that appeal to consumers on a budget, such as Costco and Target, according to Reuters.

Clothing companies such as Gap Inc , TJX Cos Inc  and Limited Brands Inc are expected to turn in the smallest gain, of 2.5 percent.

TJX, Chico’s FAS Inc  and Ann Taylor parent Ann Inc indicate that May was strong, while Pacific Sunwear of California Inc , Aeropostale Inc (ARO.N) and Urban Outfitters Inc  saw generally weak trends.

Though they have not commented on May trends, early data suggests Limited and Ross Stores Inc probably performed well, while Gap was likely soft.

Consumer strategists say retailers that cater to lower-income consumers are expected to struggle throughout the year, since their customers are more affected by unemployment and higher food and fuel prices than a recovering stock market.