Auto Market Weekly Summary: May 22

Retail sales increased slightly in April from March but were down from a year ago. Half of the major categories are down year-to-year.

New residential construction trends were mixed in April, but building permits now exceed starts, and the activity indicates that single-family construction is stabilizing.

Existing home sales declined in April as supply limits sales. This is also a key reason why new construction and single-family construction, in particular, may not fall much more. 

The labor market is not as strong as a year ago, but the metrics are varied and do not indicate major deterioration or signs of significant stress emerging. Although initial jobless claims are now higher than before the pandemic, continuing claims are not. Moreover, jobless claims remain at historically low levels relative to the job base.

April Retail Sales Up from March but Down Year Over Year

Retail sales increased 0.4% in April, which was half the expected increase, but March’s decline was revised to be less than initially reported.

The auto sector performed on par with the overall retail market as sales excluding motor vehicles and parts increased by 0.4%, while sales of motor vehicles and parts also rose 0.4%.

Category-level performance was again mixed in April, but more major categories were up than down. Miscellaneous stores (+2.4%) and non-store retailers (+1.2%) had the largest gains. Sporting goods, hobby, book, and music stores (-3.3%) and furniture, home furnishing, electronics, and appliance stores (-0.6%) had the largest declines.

Retail sales were up 1.6% from a year ago on a nominal basis, down from 2.4% in March to 5.3% in February. Compared with last year, half of the major categories are down, with gas stations (-14.6%) and furniture, home furnishing, electronics, and appliances (-6.8%) down the most.

Motor vehicles and parts were down 0.5% from a year ago, while food services and drinking places (+9.4%) was the category up the most. Adjusted for inflation using the Consumer Price Index (CPI), retail sales increased 0.1% for the month but were down 3.2% year-to-year.

Home Construction Increased; Permits Declined

Residential construction starts increased in April when a small decline was expected. Permits declined, and March’s starts decline was revised to be larger than previously reported.

The seasonally adjusted annualized rate of starts increased by 2.2% when a decline of 1.4% was expected. Permits declined 1.5% when they were expected to be unchanged, but the April decline was revised to a larger decline than originally reported. The increase in starts was in both single family and multifamily.

After the April increase, total starts were down 22.3% from a year ago but up 10.6% compared to April 2019. Permits were up by 7.3% compared to 2019 in single family but up by 12% in multifamily. Permits increased for the month in single family (+3.1%) but declined in multifamily (-7.7%) and were down 21.1% from a year ago in total, down 21.2% in single family, and down 21% in multifamily.

Permits lead starts, so the permitting pace at 1.416 million units was slightly ahead of the 1.401 million starts pace, which indicates that starts could increase further in the coming months. The construction report in April was mixed but was generally interpreted as showing stabilization.

Home Sales Decline, Pace Improves From Last Fall

Existing home sales declined again in April after seeing the first increase in more than a year in February. The existing home sales, or seasonally adjusted annual rate (SAAR), declined 3.4% to 4.28 million from a downwardly revised 4.43 million in March.

At the April rate, existing home sales were down 23.2% from a year ago but still at a better pace than we saw in November-January. Inventory increased 7.2% to 1,040,000 units, up 1.0% year-over-year and the highest level in five months.

Inventory keeps moving quickly, as 73% of the homes sold in April were on the market for less than a month, and the typical time on the market was 22 days, down from 29 days in March but up from 17 days in April last year. The months of supply of homes for sale increased to 2.9 months from 2.6 months in March but is still less than half of what is considered normal.

The median sales price increased to $388,800, down 1.7% from a year ago. The National Association of Realtors reported that roughly half of the country is experiencing price gains.

The housing market remains very sensitive to mortgage rates, which have been volatile so far this year. The existing home market is very constrained by supply and will be as long as rates remain high since existing mortgages are much lower than what’s possible now.

Initial Jobless Claims Decline, Holding at Historical Lows

Seasonally adjusted initial jobless claims declined by 22,000 to 242,000 for the week ending May 13. That was 28,000 more than we saw in 2020 before the pandemic began.

Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, declined by 8,000 from the previous week, moving the total down to 1.80 million as of May 6. That level of continuing claims was 88,000 lower than before the pandemic.

The broadest measure of continuing claims declined by 29,000 to 1.69 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is down 136,000 over the last four weeks and is 417,000 lower than the pre-pandemic level.

The labor market is not as strong as a year ago, but the metrics are varied and do not indicate major deterioration or signs of significant stress emerging. Although initial claims are now higher than before the pandemic, continuing claims are not. Moreover, jobless claims remain at historically low levels relative to the job base.

Jonathan Smoke

Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.