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Solid demand drives auto sales higher in June

Kevin Lamarque / Reuters

Auto sales are a canary in the coal mine for consumer spending, so the sales increases could indicate U.S. consumers remain somewhat upbeat.

UPDATED 10:48 ET: The major automakers -- GM, Ford, Chrysler and Toyota -- reported higher domestic sales Tuesday, driven by good demand that shows  American consumers remain willing to shell out dollars for a new car.

Chrysler, the No. 4 automaker in terms of new vehicle sales, posted a 20 percent increase in sales year-over-year. It was the Fiat SpA affiliate's best June sales data since 2007 and its 27th consecutive month of topping sales from the previous year.

Ford Motor Co., the No. 2 automaker, said its U.S. sales rose 7 percent in June, helped by a 28 percent increase in sales of the new Escape SUV. Ford said the Escape had its best month ever at 28,500 sold. Ford also saw strong sales for its Explorer midsize SUV, which was up 35 percent.

General Motors Co., the No. 1 automaker, said its U.S. sales rose 16 percent in June on solid demand for small and midsize cars.

Auto sales are a canary in the coal mine for consumer spending, so the sales increases from the world's major automakers could indicate U.S. consumers remain somewhat upbeat, despite a stumbling job market, a debt crisis in Europe and signs that the recovery is slowing.

They are also a sign that Americans continue to replace vehicles that they held onto longer while the economy was in the throes of the Great Recession.

Last week, General Motors Co Chief Executive Dan Akerson said he expected sales for June would be "surprisingly strong" at an annualized sales rate of between 14 million and 14.2 million.

"We are looking for U.S. light vehicle sales for the industry to come in above 14 million," on a seasonally adjusted annualized basis, said GM spokesman Jim Cain on Tuesday.

On average, analysts surveyed by Reuters expect a 13.9 million annualized sales rate.

GM said its vehicle sales in June totaled 248,750, up 16 percent from the previous year. All four of GM's U.S. brands - Buick, Cadillac, Chevrolet and GMC -- showed sales increases for the month. GM said June sales were its highest since September 2008.

Sales of the Chevrolet Volt electric car more than tripled over June 2011, to more than 1,700. GM also saw double-digit sales increases for the Chevrolet Malibu and Buick LaCrosse midsize cars.

Sales of the Chevrolet Cruze small car were down 24 percent. The Cruze surged in popularity last year when Japanese cars were unavailable after the earthquake. But GM made up for some of that volume with strong sales of its new Chevrolet Sonic subcompact.

GM's best-seller, the Silverado pickup, was up 3 percent as housing construction continues to recover. GM said all truck and SUV sales were up 11 percent.

Michelle Krebs, senior analyst with Edmunds.com, on Tuesday said sales were underpinned by pent-up demand, as consumers replaced older vehicles, low interest rates and marketing incentives linked to the Fourth of July holiday.

Ford sales climbed 7 percent to 207,759 vehicles, according to the automaker, with strong sales of sedans, utility vehicles and pickup trucks.

Toyota Motor Corp, the No. 3 automaker in new car sales, showed a 60-percent June sales increase as it has fully recovered from the March 2011 earthquake and tsunami in Japan, which pressured sales for Japan's automakers in 2011. Toyota is the third largest in terms of U.S. sales.

Chrysler sales rose 20 percent to 144,811 vehicles, the company said on Tuesday, slightly topping analyst expectations.

Nissan, which is No. 6, showed a 28-percent sales gain, to 92,237 new vehicles. The Nissan brand had record June sales of 81,801, up 25 percent, while the luxury Infiniti brand showed a 66-percent sales rise to 10,436.

J.D. Power and Associates and LMC Automotive expect a 20-percent gain in U.S. auto sales for June.

Sales in the first four months of this year were boosted by mild weather and the post-earthquake return of Japanese inventories. But since then, the economic picture has gotten cloudier. In June, employers scaled back hiring and manufacturing shrank for the first time in nearly three years. Consumer confidence — which needs to be strong for buyers to invest in new cars — fell for the fourth straight month.

The news isn't all worrisome. If sales come in at 13.8 million for the year, they would still be stronger than the 12.8 million in 2011. And they'd be much stronger than the 30-year low of 10.4 million during the recession in 2009.

Low interest rates and better credit availability could also lure buyers. The average interest rate on a 60-month new-car loan is now 4.5 percent, down from 6.98 percent two years ago, according to Bankrate.com.

"The affordability of cars is probably at an all-time high," Chrysler Group sales chief Reid Bigland said last week.

Reuters and The Associated Press contributed to this report.

A look at what to expect from last June's auto sales, with CNBC's Phil LeBeau.