- Consumer sentiment has increased substantially.
- Joblessness is high but not rising.
- Used-vehicle sales are climbing.
The downward trend in new daily COVID-19 cases continues. Hospitalizations and deaths are on the decline as well. The pandemic risk remains at the highest level for much of the country, but conditions should improve as the month ends.
On the economic side, joblessness remains high but is not continuing to rise, consumer sentiment rose significantly, and used-vehicle sales and values are climbing.
Joblessness high: Jobless claims are no longer rising, but they remain elevated. Traditional continuing claims declined by 127,000 to 5.1 million people as of Jan. 9. In the latest data, 16 million Americans remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond six months. Initial claims as of Jan. 16 declined by 26,000 to 900,000, which remains much higher than we had been seeing since August, but at least it is lower than the prior week’s downwardly revised 926,000.
Consumer sentiment up: Consumer sentiment increased substantially late last week and has more than recovered the ground lost in January. The daily measure of consumer sentiment from Morning Consult was up and down in January. It now may be showing signs of consistent gains.
We started the year with sentiment improving, but the unrest at the Capitol created declines in seven of nine days following the Jan. 6 event. Since Inauguration Day last week, we have seen strong gains, including Friday’s 1.3% gain, which was the strongest one-day gain in the history of the survey data back to January 2019. After last week’s gains, the index is down by 3.3% compared to the end of October and down by 21.4% compared to the end of February.
Used sales rise: Used-vehicle sales are likely to end January at least as strong as December, and momentum is improving. Used-vehicle values also are increasing.
In the used vehicle market, retail sales also gained momentum in December. While January is a low volume month, the sales trend saw improvement last week over the week prior. Conditions suggest we will at least see a similar performance in January as we saw in December.
We are starting to see wholesale used vehicle prices increase. The seasonally adjusted Manheim Used Vehicle Value Index increased 0.7% comparing the first 15 days of January to the month of December. The non-seasonally adjusted (NSA) monthly change was +0.4%. Several models of vehicles had week-over-week price increases last week to drive aggregate prices higher.
Housing strong: Housing ended 2020 strong as new construction and existing home sales saw gains in December. Residential construction activity increased in December as starts and permits both grew and reached new multiyear highs. The seasonally adjusted annualized rate (SAAR) of starts increased 5.8% while permits increased 4.5%. Starts are now up 5.2% from last December, which had seen a big increase in activity a year ago. Permits are up a more impressive 17.3% from a year ago. Permits lead starts, and the permitting pace at 1.709 million units still exceeds the 1.669 million starts pace. This implies that starts likely will increase further as conditions allow.
Beneath the totals, quite a split in the composition of new construction is evident. Single family permits are up 30% year over year, while multi-family permits are down 7%. Multifamily permits are more volatile and did decline in December from November. Low mortgage rates and increased demand for single family homes and second homes last year helped new single-family construction grow. Multifamily has been dealing with rent forbearance and weakened demand for apartments as lower wage workers have been hardest hit in the pandemic and as more people prefer to move out of denser urban areas.
Existing home sales ended the year gaining back some of the momentum lost in November. The existing home sales SAAR increased 0.7% in December to 6.76 million. The pace of existing home sales is now up 22.2% from a year ago and is at the second highest level since November 2005 (October was higher). Inventory declined 16.4% and was down 23% from a year earlier. The National Association of Realtors also reported that 70% of the homes sold in December were on the market for less than a month. The months’ supply of homes for sale declined to 1.9 months, which is a new record low and less than a third of what is considered normal. The median sales price represented a 12.9% year-over-year gain. Home sales improved in the Northeast and the South, were unchanged in the Midwest, and were down in the West.
Check back on Smoke on Cars for a video that will include updated data.