Auto Market Weekly Summary

Key Highlights:

• While the Consumer Price Index reported a 0.8% decline in used vehicle prices and flat new vehicle pricing in April, Cox Automotive observed gains in both wholesale and retail used prices as well as rising new retail vehicle prices.
• Auto retail sales underperformed in April, with a slight monthly dip but strong year-over-year growth.
• Consumer sentiment toward vehicle purchases improved in May, driven by better price perceptions and stable interest rate expectations.

Inflation Trends

Headline inflation was softer than expected in April as year-over-year inflation, according to the Consumer Price Index (CPI), declined to 2.3% while core inflation was steady at 2.8% year over year.

• The CPI rose 0.2% in April, slightly below expectations and a sign that inflationary pressures may be easing.
• Core CPI, which excludes food and energy, also rose 0.2%, maintaining a steady pace and reinforcing the Fed’s cautious optimism.
• Used vehicle prices declined 0.8%, while new vehicle prices held flat, despite earlier gains in wholesale and retail pricing, according to the CPI. Conversely, Cox Automotive observed wholesale and retail used price gains in April and increasing new retail vehicle prices.
• Motor vehicle parts declined 0.1%, but motor vehicle insurance jumped 0.7%.

Retail Sales

Retail sales in April were slightly better than expected, but category-level performance was mixed, with seven of twelve categories down for the month, but only gas stations were down year over year.

• Retail sales in April rose 0.1% month over month, following a revised 1.7% gain in March.
• The auto sector underperformed the rest of the retail market, as sales excluding motor vehicles and parts increased by 0.1%, while sales of motor vehicles and parts declined by 0.1%.
• Seven of 12 major retail categories posted monthly declines, with gas stations (-2.5%) and sporting goods, hobby, book, and music stores (-2.5%) leading the drop.
• Food services and drinking places saw the strongest monthly gain at 1.2%.
• Year over year, retail sales were up 5.2% on a nominal basis, matching March’s revised pace.
• Gas stations were the only category down year over year.
• Motor vehicles and parts (+9.4%) and health and personal care stores (+8.5%) led annual gains.
• Adjusted for inflation, retail sales declined 0.2% month over month but rose 2.7% year over year.

Housing Market

Residential construction trends were mixed again in April as starts increased but permits fell, following opposite trends in March. Multi-family shows more promise for near-term growth.

• Housing starts rose 5.7% in April, driven by a 30% surge in multi-family construction.
• Building permits, however, fell 3%, suggesting potential softness ahead in new construction activity.
• The divergence between starts and permits reflects ongoing uncertainty in the housing market, influenced by interest rates and builder confidence.

Consumer Sentiment

Consumer sentiment measures were mixed in the first half of May, but the more representative daily index from Morning Consult shows a gain for the first month this year.

• The initial reading on Consumer Sentiment from the University of Michigan surprised to the downside and declined 2.7% to 50.8, which was the same level as mid-April and again the lowest reading since June 2022. The index was down 26.5% year over year.
• Views of current conditions and expectations both declined, but current conditions declined the most.
• Expectations for inflation in one year jumped to 7.3% from 6.5%, and expectations for inflation in five years increased to 4.6% from 4.4%.
• Consumers’ views of buying conditions for vehicles increased as views of prices improved and views of interest rates were steady.
• The Morning Consult’s daily index of consumer sentiment shows a positive trend with data through May 15.
• After declining every month this year, the index is up 3.9% so far in May.
• Views of current conditions and future expectations both improved in the first half of May, but future expectations have improved the most.

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.