By Kasra Kangarloo

WASHINGTON (MNI) – U.S. automobile sales are expected to have held
fairly steady in June, with the combined effects of a slowdown in the
economy and ongoing supply disruptions related to the tsunami likely
dampening any big improvement.

“There’s going to be softer demand reflecting a lack of inventory
on dealer lots, some basic uncertainty and momentum loss in job growth,”
John Hermann, economist at State Street Global Markets, said in a
telephone interview.

The report for May payrolls, released earlier this month, showed an
addition of only 83,000 private sector jobs, well below market forecast.
Other disappointing data released over the month, including regional
manufacturing surveys for Philadelphia and New York and consumer
confidence surveys, suggest the economic recovery may be losing steam.

Auto sales for the month of May were also well below expectations,
posting an annual pace of 11.8 million total sales and 9.7 million
domestic sales, following 13.14 million and 10.2 million sales,
respectively, in April.

June sales are forecast to rise to annual pace of 9.6 million
domestic sales, according to a survey of economists by Market
News International.

The effect of a diminished recovery has conflated with the expected
effects from supplier disruptions following the March tsunami in Japan.
Sean Incremona, economist at 4Cast Ltd., said in a telephone interview
that “issues from Japan’s supply chains probably exaggerated the effects
of the slowdown in demand.”

According to Aaron Bragman, senior analyst at IHS, the perception
among American consumers that there is a shortage of Japanese autombiles
played as a large role in diminished sales as the actual shortage, as a
number of models, such as the Honda Prius and Civic, were in supply yet
still saw a sharp drop in sales.

“Some of it is a genuine lack of inventory at some Japanese
manufacturers and some it is a percieved lack,” he said, adding that
concerns over the job market added to the mix.

Both Jodi Tinsen, production analyst for Chrysler Corp., and Tom
Hendersen, sales analyst at General Motors, downplayed the effects of
Japan’s supplier disruptions on production. Tinsen described it as
“fortunately manageble,” in a telephone interview, while Hendersen said
that it had “not affected business” over the past couple months.

“I think we’re cautiously optimistic that we’ve turned a corner and
our Japanese suppliers are beginning to pick up,” Tinsen said.

Tinsen also added that Chrysler had moved the summer shutdown of
three plants from July to June to take pressure off Japanese suppliers.

June auto sales will be announced Friday, July 1.

— Kasra Kangarloo is a Washington reporter for Need to Know News

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MAUDS$]