New vehicle sales dropped sharply following last Tuesday’s terrorist attacks in New York and Washington, D.C., according to J.D. Power and Associates. Power Information Network (PIN), a division of J.D. Power and Associates that collects daily new vehicle transaction data, reports new vehicle sales dropped 35 percent Tuesday compared with the sales average of the four previous Tuesdays, and were 26 percent lower than sales on the same day a year ago. New vehicle sales maintained about the same pace Wednesday and Thursday before dipping even lower Friday, when they fell 42 percent from the sales average of the previous four Fridays, according to PIN. The weekend saw a slight moderation in sales numbers from Friday’s declines, with Saturday’s sales down 33 percent from the average of the previous four Saturdays, and Sunday’s preliminary sales figures down 25 percent from the average of the previous four Sundays. “The declines are substantial, but given the gravity of the situation I would not have been surprised if they had been much worse,” said Tom Libby, analyst and director of PIN consulting operations at J.D. Power and Associates. PIN is a J.D. Power and Associates network with more than 5,000 participating auto dealerships across the country that collects and analyzes auto purchase transactions. PIN gathers transaction-level details that include sales price, rebates and interest rates, as well as information on the vehicle. “Last week’s tragic events are causing consumers to postpone purchases of new light vehicles and may drive the economy into a short-term mild recession,” says Dr. Van Bussmann, senior vice president of Global Forecasting at J.D. Power and Associates. Bussmann cautions that downward pressure on the production and sales of new vehicles will most likely intensify over the next several months; however, aggressive incentive programs already in place will probably be enhanced to prevent sales from dropping too sharply. “Unless we become involved in an extended land war, the U.S. economy is likely to be expanding once again by the first quarter of 2002, and sales of new light vehicles will stabilize at about 16 million units,” Bussmann said. “In the long run, sales of new vehicles will not be noticeably affected.” Consumer confidence, a key to keeping the U.S. economy and much of the world economy afloat during the past year, is likely to drop sharply for several months and then rebound, Bussmann said. “This pattern occurred after the stock market crash of 1987 and the Gulf War in 1991,” Bussmann said. “Consumers may initially increase saving as a way of dealing with the uncertainty created by such massive terrorist acts and an unknown response by the U.S. government. Increased saving will likely come at the expense of big ticket purchases such as new vehicles.” The extent of the rebound will depend on what happens to the stock market, oil prices, interest rates and unemployment. Dr. Robert Schnorbus, chief economist at J.D. Power and Associates, said the stock market is almost certain to overreact by slumping sharply in the near term. He also believes oil prices are likely to rise in the short term as traders react to the higher uncertainty of disruptions of the flow of oil and companies try to increase buffer stocks. “But oil prices and demand could actually drop if the global economy slips into recession,” Schnorbus said. “OPEC has found it more difficult to cut production in the face of falling demand than to increase production when demand rises.” About J.D. Power and Associates Headquartered in Agoura Hills, Calif., J.D. Power and Associates is a global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm’s quality and satisfaction measurements are based on actual responses from millions of consumers annually. J.D. Power and Associates can be accessed through the Internet at www.jdpa.com.