US: December sales could be further lifted by gas getting close to $2-a-gallon image

With improving household conditions stemming from the lower fuel prices seen this year, US consumers look poised to set another new car sales record in December.

The figures recorded last month showed this was the best November in 11 years and according to the AAA, prices for the average gallon of gas were still at the higher-end of $2. Prospects for even lower prices of gasoline – near the psychological threshold of $2-a-gallon keep consumer spending up. Just as the holiday promotions kick in, buyers are moving again towards large models that also yield fat earnings for the automakers.

“Psychologically, when people see prices drop below $3, it sends a very, very positive wave across everyone’s mindset,” says Fred Diaz, an executive of Nissan North America. Fuel prices now hover at a four-year low and the prospects are they’ll keep going down, so the savings from the lower fuel expenses now go towards big, expensive models like the Cadillac Escalade or the Lincoln Navigator. These two models jumped the gun last month – with the first jumping 91% and the latter “just” 88%. Smaller, more economical models are again out of favor – with models such as the Ford Fiesta down 26% or the Toyota Prius hybrid falling 14% in November.

AAA said the average pump price for a gallon of gasoline dropped to $2.76 on December 1, and it’s lower by 93.6 cents from this year’s peak of $3.696 recorded in April. Data compiled by the AAA shows the price is the lowest since October 5, 2010.

Via Bloomberg