Auto Market Weekly Summary

More updates on economic metrics are being received, leading up to Thanksgiving. Last week focused on updates about job creation and unemployment, while this week brings the September update for producer prices. The next release for the consumer price index data will come on Dec. 18, which is notable as the Federal Reserve will be making its next decision on interest rate policy before seeing this data.

Detailed below, we have new updates on jobs and unemployment, consumer spending, existing home sales and housing, and consumer sentiment.

Due to the Thanksgiving holiday, Auto Market Weekly Summary updates will resume on Monday, Dec. 8

New Data Show Jobs Growth, but the Unemployment Rate Rose

The first jobs number officially received since early September was positive on Nov. 20, but the small increases in the unemployment rate will be noted by policymakers.

• The most recent jobs report through September revealed that 119,000 workers were added to the workforce, surpassing forecasters’ expectations.
• Both July and August had negative revisions, bringing the 3-month rolling average of jobs created to 62,000. 
• Average hourly earnings rose 0.2% in September against August and are higher by 3.8% against last year. When adjusted for inflation, real hourly earnings declined slightly (-0.1%) from August to September and were up 0.8% year-over-year.
• Jobless claims revealed a decline of 8,000 against last week, to 220,000 initial claims, up 1.9% against last year. Continuing claims are higher by 4.3% against last year’s level and rose 1.4% for the most recent week.

Consumer Spending Remains Positive but Volatile

Consumer spending posted negative results on a year-over-year basis for three of the last six weeks:

• Spending rose 1.6% on a non-seasonally adjusted basis for early November, according to Bloomberg. 
• The four-week moving average of consumer spending was slightly positive, up 0.1% over last year and the lowest point since mid-February.

Builder Sentiment Improves, Home Sales Increase

The housing market is benefiting from declining borrowing costs as homebuyers take advantage of lower mortgage rates to refinance.

• Existing-home sales seasonal annual adjusted rate (SAAR) in October increased to the fastest pace in eight months, moving to 4.1M on a seasonally adjusted basis, up 1.2% against September and 1.7% higher year over year. 
• The median home price moved up to $415,200, higher by 2.1% year over year and the 28^th consecutive increase.
• Total housing inventory was down 0.7% from September, resulting in 4.4 months’ supply of inventory, up from 4.1 months in October of 2024 and remaining tight.
• The National Association of Homebuilders reported improvement in their sentiment index for November, with gains in traffic and current sales, while the expectations for future sales declined three points over the month. 
• The 30-year fixed mortgage rate has risen 2 basis points (bps) from last week to 6.26% but holds much lower against levels seen earlier this year.

Consumer Sentiment Shows Mixed Signals in November

With the end of the government shutdown, consumers appear to be feeling a bit better heading into Thanksgiving, according to Morning Consult. The daily index of consumer sentiment from Morning Consult reflects an uptick in sentiment that has become a bit stronger over the last week.

• The daily index of consumer sentiment decreased 3.4% in October but has now risen 1.3% so far in November, leaving the index down 6.7% year over year and almost 8% since the beginning of the year. Consumer sentiment has risen by 2% over the last seven days.
• As of Thursday, the average price of unleaded gasoline, according to AAA, had risen 5 cents so far in November to $3.09, after reaching the lowest level of gasoline prices so far this year early in the month. Gas prices are now higher by 1% against last year.

However, the reading on the consumer sentiment index from the University of Michigan shows a more muted tone.

• Expectations of future inflation over the next year declined a tenth of a point to 4.5%, as inflation expectations over the next five years dropped half a point to 3.4%.
• Consumer sentiment declined 2.6 points so far in the month, down to 51.0, a fall of 29% compared to last year, which is a larger decline than expected. The year-over-year decline in sentiment for this index was the highest since April. 
• Consumers continue to indicate they are frustrated by persistently higher prices and income growth that cannot keep pace. 

Bottom Line

We are just starting to get updates to key economic data, and while the information is much needed, the picture of the current state of our economy remains unclear. The economy added more jobs than expected in September, but the unemployment rate rose for the third consecutive month. While it remains low against historical norms, the increase in unemployment fosters worry about the economic picture weakening. We need strong employment to help bolster consumer spending, which has shown more volatility over the last six weeks, likely influenced by the government shutdown. 

But mortgage rates have been down recently, and that’s causing home sales to rise as well as builder sentiment. We remain in a tight inventory situation for housing in the U.S., and if rates could continue to come down, that might support increases in construction activity moving into next year. There’s a strong correlation between home purchases and vehicle sales, so increasing the velocity of homes sold should have positive effects on the underlying factors in the automotive market. 

Lastly, consumer sentiment remains lower than last year, despite how you measure it. And with consumer spending driving the majority of GDP growth, we need sentiment to improve. If we can get inflation to come down, it’s likely the outlook for consumers should grow more positive, and that could be dually beneficial next year.