Auto Market Weekly Summary

Key Highlights

• The first estimate of fourth-quarter real GDP showed a slowing pace of growth at 2.3% from the 3.1% rate in the prior quarter, but underneath the total, consumer spending accelerated as spending on goods and services both increased.
• Consumer spending in December was strong and grew from a strong and upwardly revised November. Personal income growth remained healthy but didn’t grow like spending, so the savings rate declined. Inflation also picked up but came in as expected.
• New home sales improved in December, but pending home sales, which represent new contracts on existing homes, declined.

Economic Growth and Consumer Spending

The first estimate of fourth-quarter real GDP showed a slowing pace of growth at 2.3% from the 3.1% rate in the prior quarter, but underneath the total, consumer spending accelerated as spending on goods and services both accelerated.

• Personal consumption accelerated to 4.2% growth from 3.7%, driven by increased spending on goods and services.
• Spending on goods grew by 6.6% while spending on services increased by 3.1%.
• Declining nonresidential investment and a decrease in inventories contributed to a 5.6% decline in private domestic investment.
• Government spending growth slowed to 2.5% from 5.1% in the previous quarter.

Personal Income and Inflation

Consumer spending in December was strong and grew from a strong and upwardly revised November. Personal income growth remained strong but didn’t grow like spending, so the savings rate declined. Inflation also picked up but came in as expected.

• Personal income growth accelerated to 0.4%, with employee compensation growth at 0.5%.
• The savings rate declined to 3.8%, a two-year low, as spending outpaced income growth.
• The Personal Consumption Expenditure (PCE) Index, a key gauge of inflation, accelerated to 0.3% growth, with overall price inflation at 2.6% year over year.

Housing Market Trends

New home sales improved in December, but pending home sales, which represent new contracts on existing homes, declined.

• New home sales at an annualized pace of 698,000 were up 3.6% month-over-month and 6.7% year over year.
• Pending home sales declined by 5.5% in December, with all regions experiencing a decrease.
• Higher mortgage rates and increased supply have dampened demand in the housing market.

Consumer Confidence and Vehicle Purchase Plans

Consumer confidence declined in January, with plans to purchase a vehicle dropping from recent highs but remaining higher than a year ago.

• The Conference Board Consumer Confidence Index® declined 4.9% in January, which was worse than the small decline expected, but December’s index was revised much higher.
• Consumers’ views of the present and of the future both declined, but the view of the present declined the most.
• Consumer confidence was down 6.1% year over year, the first yearly decline since September.
• Plans to purchase a vehicle in the next six months dropped to the lowest level since August but plans to purchase remained higher year over year.

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.