Consumer Demand Drives Strong August Auto Sales

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The auto industry delivered an encouraging sign of an improving economy with August auto sales coming in better than expected.

With 70 percent of the August monthly auto sales reported, the monthly sales rate is tracking at 14.5 million vehicles according to J.P. Morgan. (Read More: Automakers Report Better-Than-Expected August Sales.)

That sales rate is slightly above the street estimated rate of 14.2 million vehicles.

Consumers, Truck Demand Drive Resurgence

August retail sales at dealerships accounted for 82 to 83 percent of the total industry sales. That’s roughly in line with what the industry saw in July and up 5 percent from the average retail percentage in the first half of the year.

Automakers attribute the increased sales at dealerships to pent-up demand with many Americans driving cars and trucks that are 6,7, or 8 years old. In fact, the average vehicle on the road right now is at least 10 years old.

Another factor behind the improving pick-up truck sales is the slowly improving housing market. Pick-up truck sales tend to move in tandem with the housing market as contractors and builders buy new trucks as their business improves. While housing is still struggling in parts of the country, executives believe the improving truck sales are due in part to a recovery in the housing industry. (Read More: Home Prices Are Not Rebounding as Fast as You Think.)

Ford Raises Q4 Production

Ford has raised fourth quarter production by 50,000 vehicles or 7 percent. The increase is being driven in part by growing demand for the Ford Escape which enjoyed an increase of 36.8 percent in August.

—By CNBC's Phil LeBeau