Edmunds sees strong new-car sales if infrastructure program happens

Sales of more than 1.8 million cars.

That’s what a proposed $1 trillion infrastructure commitment would generate in its first year in the most optimistic scenario suggested by Edmunds.com’s chief economist.

The program, which would “give a face-lift” to the nation’s road and bridges and fund projects such as water systems, veterans hospitals and low-income housing could generate 15 million jobs over 10 years – 125,000 jobs per month on average – wrote Larry Plache of Edmunds.com.

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“Based on Edmunds’ analysis, new-car sales could increase at a rate ranging from 1 percent to 3.75 percent in the first year of the program alone,” wrote Plache.

“These estimates do not take into account the multiplier effects of the new jobs throughout the economy … that could generate even more new-car sales. For example, the Bureau of Economic Analysis has estimated that 1.8 jobs are created for each job added in the construction industry.”

Based on last year’s new-car sales of 17.5 million, the highest percentage growth rate, and the BEA estimate on the jobs multiplier, sales would increase about 1,837,500 the first year.

“The high-growth endpoint takes into account the strong likelihood, based on survey evidence, that new job holders will purchase a car,” the economist wrote. “Adding fleet purchases by businesses to accommodate additional employees from job creation would further increase growth in new-car sales.”

A lot still has to happen before an infrastructure program could move forward, including agreement on who will pay for it, although both major political parties agree that something needs to be done. The Edmunds economist rates the chances of implementation as “reasonably high,” although the impact likely won’t happen soon enough for what has been a lackluster year so far.

“Assuming the parties can come to an agreement over funding,” Plache wrote, “we expect to see a plan approved later this year and projects (and jobs and increased car buying) beginning in 2018.”

Until then, Plache wrote, “growing new-car sales poses a challenge for a market that appears to be at equilibrium.”

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