U.S. motor vehicle sales soared to a record high last month, but the outlook continues to deteriorate, hurting GDP, according to Scotia Economics.

“U.S. auto sales surged to a record 21.2 million units annualized in October as customers rushed to cash in on once-in-a-life-time offers of 0% financing for up to 5 years,” says Carlos Gomes, Scotiabank auto industry specialist. “Overall volumes for the Big Three climbed 26% above a year earlier.”

“Despite record volumes last month, leading indicators of auto industry health — such as employment growth and consumer confidence — continue to weaken and have fallen to the lowest level since the economy was starting to recover from the recession of a decade ago,” says Gomes.

“This suggests that last month’s record sales are clearly unsustainable. History indicates that during the 1980s, similar monthly spikes in vehicle sales were followed by declines of about 30% in subsequent months.”

Given the current economic uncertainty and an expected deterioration in purchases in coming months, the recent surge in vehicle sales has not been matched by increases in production. “Lower vehicle production will subtract just over an annualized percentage point from U.S. economic growth in the final months of 2001,” adds Gomes. “In Canada, lower assemblies will reduce GDP growth by roughly half a percentage point.”