5 Stocks To Buy As Auto Sales Head Toward A Rebound

After hitting record levels during the first half of the year, U.S. auto sales increased at a relatively slower pace in July. Boosted by a variety of factors, such as cheap gasoline, auto sales had enjoyed appreciable growth before last month. However, as pent-up demand seemed to be petering out, it seemed that demand for automobiles was plateauing.

However, fresh data from research and consulting firm TechnoMetrica Market Intelligence shows us that demand for the sector is likely to pick up sharply over the rest of the year. Adding auto stocks to your portfolio seems to be a smart choice at this point in time.  

Sales Hit Record in 1H16, Pace Slips in July

During the first half of 2016, light vehicle sales increased 1.5% year over year to 8.65 million units, per Autodata. This set a new record for first-half sales results. Sales increased 2.5% year over year to 1.5 million units in Jun 2016. Product segments like trucks and utility vehicles recorded higher sales in June.

Gains for July were relatively muted in comparison. U.S. light-vehicle sales inched up 0.5% year over year to 1.52 million units in Jul 2016. However, the figure came in below most estimates. Market watchers took the view that pent-up demand powering the sector since 2009 was slowly decreasing. 

Sales Likely to Increase in 2H16

Data released by TechnoMetrica shows that demand for automobiles is likely to witness an uptick over the rest of the year. The firm’s indigenous Auto Demand Index or ADI is a method of gauging the willingness of consumers to purchase or lease a new vehicle over the next six months. The ADI survey is conducted every month and the index experienced a substantial decline in July.

Most of this was attributable to global concerns such as the fallout of the surprise Brexit verdict. However, the index has surged by 41 points or 50% during August, to touch a score of 123, the highest reading in a year. The ADI has also exceeded its short and long term average levels during August.

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