by Calculated Risk on 6/01/2011 04:00:00 PM

A few comments:
• Obviously the Japanese supply chain disruption impacted auto sales significantly in May. This has also negatively impacted manufacturing overall, and at least partially explains why the ISM manufacturing index was down sharply in May. The ISM employment index was still fairly strong, suggesting many manufacturers view this as a short term issue.

• The good news is the supply issues are being resolved ahead of schedule. From Edmunds.com:

“Manufacturing disruptions appear to have peaked in April and May, and recent news points to steady improvements moving forward,” said Lacey Plache, chief economist at Edmunds.com. “Toyota said it expects North American production of its top-selling Camry and Corolla models to be back at 100 percent next month, and Nissan’s key engine plant in Japan is returning to full production next week – ahead of schedule next week. Even Honda, which was the hardest hit of the big three Japanese automakers, is making optimistic statements about its recovery."

• The automakers lowered their incentives in May, and this also impacted sales. From TrueCar.com:

“Even though incentives are their lowest in nine years, we believe this is an anomaly and expect incentives to climb again in June.”

TrueCar.com estimated that the average incentive for light-vehicles was $2,017 in May 2011, down $822 (28.9 percent) from May 2010 and down $304 (13.1 percent) from April 2011.

• It is difficult to tell how much of the recent slowdown is related to supply chain issues, and how much is related to other issues (high oil and gasoline prices, weakness in housing, European financial crisis, government cutbacks, etc), but we should see a bounce back in auto sales over the next few months because most of this decline appears to be from temporary factors.

Click on graph for larger image in graph gallery.

Based on an estimate from Autodata Corp, light vehicle sales were at a 11.79 million SAAR in May. That is up 1.5% from May 2010, and down 10.2% from the sales rate last month (April 2011).

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for May (red, light vehicle sales of 11.79 million SAAR from Autodata Corp).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This was well below the absurd consensus estimate of 12.8 million SAAR. As mentioned above, it is difficult to tell how much of the decline is due to supply chain issues - but my guess is we see a bounce back over the next few months.