- Consumer spending falls, including on vehicles.
- Consumer confidence weakens; vehicle buying plans fall to new lows.
- Housing market, once a bright spot, loses momentum.
The last two weeks of December provided several key data points for November that revealed declining momentum in the economy. The holiday weeks also provided updated readings on consumer sentiment and confidence that did not indicate improving trends in the final month of the year. However, the weekly jobless claims data provided some encouragement, albeit likely temporary and influenced by the holidays.
Consumer spending dips: Consumer spending declined 0.4% in November as personal income fell 1.1%. Spending on new motor vehicles declined 5.2%. The decline in personal income was driven by an 8.5% decline in proprietors’ income and by a 3.3% decline in government transfer payments as unemployment benefit payments declined 9%.
The personal savings rate declined to 12.9%, which was the lowest savings rate since March, but the savings rate remains elevated, as it was 8.3% in February. The Personal Consumption Expenditure (PCE) Index, the key gauge of inflation that the Fed follows was unchanged from October. Overall price inflation, according to the PCE, declined to 1.1% in November compared with a year ago.
Home sales decline: Both pending and new home sales, which are based on new contracts signed, declined in November. The pending home sales index declined 2.6%. New home sales declined 11%. Both types of homes sales have seen a declining pace of sales throughout the fall. Existing home sales also declined by 2.5% in November. The housing market has lost momentum due to record prices amidst record low supply. However, home sales are still up substantially from last year. Existing home sales were up 26% year-over-year in November, while pending home sales were up 16%, and new home sales were up 21%.
Consumer confidence weakens: Consumer Confidence, according to the Conference Board, declined 4.6% in December and left confidence down 31% year-over-year and down 33% from February. Plans to purchase a vehicle in the next 6 months declined in December to the lowest level since April. Plans to purchase a home also declined in December to the lowest level all year. The final reading on Consumer Sentiment from the University of Michigan declined 4.9% in December and left sentiment down 20% from February. The index of consumer sentiment from Morning Consult also saw declines for most of December, leaving it down 23% since February 29.
Jobless claims fall: Initial claims and continuing claims both fell in the last two weeks of reported data. The latest data show 5.2 million Americans were on traditional unemployment benefits, which are limited to at most six months of coverage, but 19.6 million people remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond 6 months. With the passage of the stimulus bill in December, the pandemic assistance will continue through March. There are 13.2 million consumers receiving it. Initial claims declined last week for the second week in a row to 787,000, which was the lowest level in four weeks but is still very high by historical standards.
Check back on Smoke on Cars for a video that will include updated data.
JOIN US: COX AUTOMOTIVE INDUSTRY INSIGHTS 2021
Plan to join Cox Automotive Chief Economist Jonathan Smoke, Senior Economist Charlie Chesbrough, and the Industry Insights team for an expanded quarterly update on Friday, Jan. 8, 2021, at 11 a.m. EST. As a new year dawns for the automotive industry, this 90-minute webcast will kick off with Cox Automotive data and insights on both the new- and used-vehicle markets for 2020, as well as 2021 forecasts and what the team sees in the year ahead.
Afterwards, we will turn our attention to the Manheim Used Vehicle Value Index, covering Manheim Market Report prices, segment performance, rental risk pricing and more. Plus, Zach Hallowell, senior vice president, Manheim Digital, will share an update on data and developments in digital.