DETROIT (Reuters) - U.S. auto sales are set to rise 11 percent in October, led by Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T) which benefited from increased demand for compact cars as gasoline prices remained high across the country.
The annual sales rate is expected to be 14.9 million vehicles for the second straight month, according to a Reuters poll of economists. This would also mark the best October since 2007, the year auto sales slowed and the U.S. economy tipped into a recession.
Automakers will report monthly U.S. sales figures on Thursday.
“This stability at a higher level is taking the edge off the risk factors for the remainder of 2012 and into 2013, as the U.S. economy wrestles with the European crisis,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive.
Rising home prices, attractive vehicle financing options and Americans’ growing need to replace their aging cars also spurred more consumers to showrooms.
Disruptions from Hurricane Sandy, which hit the U.S. East Coast on Monday night, likely cut out about 100,000 vehicle sales - but that demand will come back in November, Jefferies analyst Peter Nesvold said.
Over the last five years, the U.S. auto sector has undergone a wrenching overhaul that led to plant closures, job losses and the government-financed bankruptcy restructurings of General Motors Co (GM.N) and Chrysler Group LLC FIA.MI in 2009. Ford Motor Co (F.N) also overhauled its U.S. operations but did not take a government bailout.
Auto sales are an early indicator each month of U.S. consumer demand.
An 11 percent jump in October sales would illustrate the continued recovery of the U.S. auto industry, which three years ago was in crisis mode as sales fell to the lowest point in nearly three decades.
The October sales report will be the last before Election Day, marking the end of a contentious U.S. presidential race that has repeatedly thrust GM and Chrysler into the spotlight in televised debates, stump speeches and campaign advertisements.
The merits of the U.S. government auto bailout have been hotly debated during the presidential race, with Republican candidate Mitt Romney criticizing President Barack Obama’s willingness to extend direct government aid to the two U.S. automakers.
Last week, Romney told a crowd in the crucial swing state of Ohio that Chrysler is considering moving “all” Jeep production to China. The automaker, which makes Jeeps in Michigan, Illinois and Ohio, denied the claim in an October 25 blog and in an email to employees this week saying it was looking to make Jeeps in China, but will keep up U.S. production.
Chrysler is set to show a 13 percent sales gain in October, according to auto research company Edmunds.com. GM, the largest U.S. automaker, is expected to report a 4.7 percent rise, while Ford, the No. 2 U.S. automaker, may see a 3.5 percent bump.
But Detroit’s gains will lag those of Toyota and Honda. Kelley Blue Book said Toyota, which makes the Prius hybrid, was helped by higher fuel costs, particularly in California, where prices rose to their highest level since mid-2008.
Toyota sales are expected to jump by 25 percent, while Honda is set to post an 18 percent increase. Last year, the two companies were still facing vehicle shortages after a massive earthquake in Japan in March 2011.
“We expect fuel economy will remain buyers’ top concern, especially in California, and small and midsize cars will benefit while larger SUVs and cars could suffer,” Nesvold said.
The October sales report caps a busy week for the U.S. auto industry, which saw third-quarter profit reports from all three Detroit automakers.
GM on Wednesday posted a surprisingly strong profit on higher sales and vehicle prices, mainly in the United States, and said it was targeting a return to break-even levels in its European operations by mid-decade. GM shares rose 9.5 percent to end at $25.50 on Wednesday.
Reporting by Deepa Seetharaman; editing by Matthew Lewis