Auto economist sees limited drop in 2008 sales

SAN FRANCISCO (Reuters) - A recovery in the economy later this year will keep U.S. vehicle sales from plunging as deeply as the most bearish forecasts suggest, according to an outlook released on Sunday by the group representing U.S. auto dealers.

Paul Taylor, chief economist of the National Automobile Dealers Association, said he expected auto sales would decline to 15.7 million vehicles in 2008.

That would mark a third straight year of slumping sales but still represent a relatively stronger tally for the struggling industry than some Wall Street analysts and investors expect.

"The economy will improve in the second half of 2008 to help reach sales of 15.7 million units of light vehicles," Taylor said in a statement.

U.S. auto sales fell for a second consecutive year in 2007, dragged down by a slowing economy, a housing market slump and tighter credit markets that pinched less-credit-worthy borrowers.

While the consensus view among analysts and high-profile investors points to a further decline in the car industry's single-largest market in 2008, there is still a debate about how deep the slump will become.

Sales of cars and light trucks in the United States slipped to 16.15 million vehicles in 2007, down 2.5 percent from the year earlier.

Many analysts and some industry executives see a risk for a drop down to near 15.5 million vehicles this year, although some automakers like General Motors Corp GM.N are still banking on stronger demand in the second half.

Taylor, who gave his forecast on the sidelines of an auto dealer convention hosted by the NADA, cited a range of now-familiar negative factors for auto sales, including high energy costs and a sagging housing market.

"Real estate difficulties will persist into 2009 for about half of the U.S. population," Taylor said.

He added: "Short-term interest rates are falling, but credit problems and unemployment will persist in 2008."

In 2007, sales of light trucks -- including pickup trucks, minivans and sport utility vehicles -- accounted for 53 percent of overall U.S. vehicle sales, Taylor said.

Crossover utility vehicles, which share the styling of larger SUVs but are built on lighter and more fuel-efficient car frames, represented the only segment of the market to post substantial growth.

Boosted in part by concern over fuel costs, U.S. sales of crossover vehicles were up about 18 percent in 2007, while sales of small cars were up about 1 percent.

The NADA represents about 20,000 new car and truck dealers in the United States. The six major automakers in the U.S. market are GM, Toyota Motor Corp (7203.T), Ford Motor Co (F.N), privately held Chrysler LLC, Honda Motor Co (7267.T) and Nissan Motor Co (7201.T).

(Reporting by Kevin Krolicki; Editing by Braden Reddall)