Auto Market Weekly Summary

While unemployment remains historically low, job growth is suddenly slowing, reflecting the negative trends in many sectors being impacted by trade and growing uncertainty. This quarter is seeing weaker consumer spending and business investment, which will no doubt lead to weaker economic growth. The Fed may take pre-emptive measures in July and cut rates

Job growth drops: Job growth slowed dramatically in May as trade challenges begin to take their toll on economic growth. The unemployment rate remains at a 49-year low, but wage growth is also slowing.

Fed’s next move: The Fed indicated willingness to act if economic growth was threatened by growing trade issues, and the financial markets reacted strongly, pushing equities higher for the week and sending long-term bond yields even lower. The market sees a greater than 70% chance of the Fed cutting rates in July to keep the economic expansion going.

Fleets drive new-car sales: New-vehicle sales were stronger in May than they had been so far this year, though still off from a year ago. The improvement was again mainly driven by gains in fleet sales; retail sales were down though incentives grew. The May SAAR came in at 17.3 million, up slightly from last year’s 17.2 million and a big increase from April’s 16.3. Cars slid, trucks gained.

CPO sales dip: CPO sales were down 3% in May from year-ago levels but were up from April. We estimate the May used SAAR to be 39.2 million, down from 39.7 million last May and down slightly from April’s 39.3 million rate.

The Manheim Used Vehicle Value Index increased in May. The spring bounce ended in April and May saw only slightly lower than normal depreciation very similar to last year. As a result of more normal depreciation, we are seeing decelerating year-over-year price gains.

Looking ahead: This week, we’ll get May inflation data and retail sales and preliminary June consumer sentiment, and we are reporting on second quarter dealer sentiment.