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Drop in September auto sales is likely momentary dip, experts say

Sales of vehicles and auto parts in the U.S. slid in September, dragging down broader retail sales for the month, but experts tracking the automotive industry said they view the figures as a momentary dip — at least for now.

September motor vehicle and auto parts sales dropped 0.9% from the previous month to $105.3 billion on a seasonally adjusted basis, according to advance data from the U.S. Census Bureau. U.S. retail sales in general unexpectedly declined for the first time in seven months in September, with seasonally and calendar-adjusted U.S. retail and food services sales slipping 0.3% to $525.56 billion from $526.89 billion in August.

Even with the drop in September, car sales have trended upwards overall in recent months, according to data compiled by S&P Global Market Intelligence.

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Bill Selesky, senior research analyst at Argus Research Group, noted that car sales for the month fell more than he had predicted. He had forecast a 0.5% drop and said he senses that consumers are getting worried about the likelihood of an economic slowdown.

"I think what they have been doing is putting off buying high ticket items and going for smaller ticket items," Selesky said in an interview.

The average transaction price of a new car in September was $37,590, according to Kelley Blue Book.

"Consumers are being a bit more cautious on spending their income," Selesky said, adding that he thinks auto sales could be lower over the next six to 12 months.

"It may not be anything dramatic," he added, saying that he is not forecasting a recession.

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University's Robinson College of Business, said car sales have been fluctuating month by month.

"September sales were not good," Dhawan said in an interview. "August was super good. In comparison, September looked pretty bad."

The past couple of years have been good for auto sales, he said, adding that automakers offered incentives to customers.

"But now all those tricks have run out, and the auto industry is reverting back to the normal trend," Dhawan said. "That looks very low, but it actually is going back to normal."

Dhawan said he would start to worry if the decline continued over the next three months.

Auto sales have probably peaked and will trend modestly lower over time as job growth continues to slow, according to Scott Hoyt, Moody's Analytics Head of Consumer Economic Research.

"I don't think the decline in September was a terribly big deal," he said.

Hoyt said that looking beyond any volatility, there is a healthy trend in auto sales.

"With the trend we're seeing now, not with the September decline, there's modest growth," he said in an interview.