US auto sales likely to grow modestly this year

US December auto sales came in at 17.2 mn units, the lowest since June and well below 18.1 mn units recorded in last three months.

2015 was one of the best years for auto sales, though it started on a soft note. A healthy economy, rising employment, increased credit availability and favorable financing conditions all contributed to the higher-than-expected growth in sales.

The joyous ride is expected to continue as these supportive economic and lending conditions remain in place.  Indeed, the rate hike by the Fed last month signals that the U.S. economy is strong, and even with the bump, interest rates remain extremely accommodative.

"While further rate hikes are expected this year, they will be gradual and unlikely to derail auto sales.  In fact, automakers may opt to offset the higher rates with higher incentives or lower margins in order to keep demand elevated. Overall, we expect auto sales in the U.S. to grow modestly this year, before edging down in 2017", says Economics TD in a research note.