June 1, 2012 at 10:12 AM ET
Updated at 12:55 p.m. ET: DETROIT — New auto sales came in weaker than expected in May, driven by disappointing results from General Motors, Toyota and Chrysler that showed industry demand slowed from the first four months.
The sales results, when combined with Friday's anemic jobs report, suggested the industry could face hurdles in its recovery from a recession four years ago that dragged GM and Chrysler into bankruptcy.
"Obviously, the economy's probably slowing a touch," said Gary Bradshaw, a portfolio manager with Hodges Capital Management, which owns Ford shares. "I still think that car sales will continue to improve from last year, but it's going to be a struggle. There are plenty of headwinds in front of us."
Nissan also posted weaker-than-expected sales in May, while Ford's numbers fell short of what Barclays and Edmunds.com had forecast. Nissan and Ford's sales rose 21 percent and 13 percent, respectively.
GM's sales rose 11 percent, while those at Chrysler and Toyota rose 30 percent and 87 percent, respectively.
Economists polled by Thomson Reuters expect an annual sales rate for the month of 14.5 million vehicles, but GM and Ford both suggested the rate would come in far below that.
GM expects the annual sales rate to finish around 14 million, while Ford forecast a final number, including medium and heavy-duty trucks, in the mid-14 million range. Medium and heavy-duty trucks typically account for about 300,000 sales annually.
Some analysts and industry officials have said the lower rate was partly due to the warmer-than-expected weather earlier in the year that drew buyers into dealer showrooms, pulling sales from the spring shopping season. In addition, falling prices at the fuel pump have reduced pressure on consumers to get rid of gas-guzzlers and buy more fuel-efficient cars.
A slower sales rate in May would be a step down from a 14.4 million sales pace of the prior two months and 15.1 million in February.
"Since our last monthly sales call over the last 30 days or so, the economic indicators came in just a little softer than in the first quarter," Ford senior economist Jenny Lin said on a conference call.
Auto sales have been one of the bright spots in the economy for several months and the monthly sales results offer an early snapshot of consumer demand.
Sales have shot up this year despite cooling consumer confidence and mixed economic data that illustrates how shaky the recovery has been over the last three years. On Friday, the Labor Department reported job growth in May that was the weakest in a year, and employers added far fewer jobs in the prior two months than previously reported.
"During any recovery you see some signals pointing upward, some neutral, some down," said Jonathan Browning, head of Volkswagen AG's operations. "While there'll be some short-term fluctuations in those indicators, those underlying trends remain in a positive direction."
One factor fueling the growth in auto sales has been Americans' increasing need to replace their aging cars and trucks, which are now a record 10.8 years old on average.
"The economy will continue to grow slowly and absolutely pent-up demand will be a strong force and will overcome maybe some of the volatility," GM's U.S. sales chief, Don Johnson, said on a conference call. "But the economy has to keep growing at a positive rate for pent-up demand to be released."
Higher fuel prices in the first quarter prompted some consumers to swap older, less fuel-efficient models to lock in fuel savings. According to Swiss bank UBS, 63 percent of dealers said higher gasoline prices increased demand in the first quarter.
With gas prices falling again, the pace of new-car sales may moderate in the second and third quarters, but the underlying consumer appetite for new cars and trucks as a result of pent-up demand remains strong, UBS analyst Colin Langan said.
GM's May sales increased to 245,256 vehicles from 221,192 in the same month last year.
Ford's sales rose to 216,267 vehicles from 192,102 in the same month last year as the No. 2 U.S. automaker boosted consumer incentives by more than 9 percent from the previous month according to Edmunds. Incentives in the overall industry rose almost 4 percent from April to May to $2,135 per vehicle.
Ford also said it plans to build 690,000 vehicles in the third quarter in North America, up 5 percent from the same period last year.
Toyota sales rose 87 percent to 202,973 vehicles. Sales at Chrysler, controlled by Italy's Fiat , rose to 150,041 vehicles from 115,363 in the same month last year.
GM shares were down 2.7 percent at $21.59 and Ford shares were down 3.8 percent at $10.16 on Friday afternoon on the New York Stock Exchange. Wall Street stocks were broadly lower on the sour jobs report.
Reuters contributed to this report.