Are GM and Ford Sending an Important Signal About the US Economy?

Both General Motors (NYSE:GM) and Ford Motor Co. (NYSE:F) today reported smaller-than-expected declines in U.S. auto sales in April, signaling a strengthening economy and prompting the former to raise its full-year forecast for the industry.

While GM warned that the next few months could be choppy, it projected U.S. auto industry would log its highest sales figure this year since 2007. GM estimated sales would be between 14 million and 14.5 million cars and trucks this year, up from its previous outlook of 13.5 million to 14 million. Sales of 14 million would represent a 9.4 percent increase over 2011.

“Despite some persistent headwinds that have come in and out of the market, whether it is the European debt crisis or some uncertainty around fuel prices, we continue to expect gradual improvement in the economy going forward,” GM sales executive Don Johnson said on a conference call on Tuesday.

The figures back up Johnson’s statement; in the first quarter of 2012, the annual sales pace was 14.6 million. Still, that’s low compared to vehicle sales between 1998 and 2007, which averaged around 16.7 million per year until plunging to 10.4 million in 2009 when GM and Chrysler filed for bankruptcy.

Compared to the first quarter, GM predicted U.S. sales growth will be relatively flat over the next few months. “The next couple of months I think will be a repeat of the March-April trend. After that, I think we’ll have to see what kind of strength the economy gets under foot,” Johnson said.

GM sales dropped 8.2 percent in April, while Ford’s fell 5 percent. Toyota (NYSE:TM) reported an 11.6 percent sales gain in the U.S., while Volkswagen AG said sales rose 31.5 percent. GM and Ford said their declines were due to three fewer selling days in April 2012 compared to April 2011, thanks to a quirk in the calendar that has happened just twice in the last 10 years. When adjusted for the fewer selling days, Ford said April sales rose 7 percent and GM said sales rose 3 percent.