- Though manufacturing continued to lose jobs in January and the impact from the coronavirus remains unclear, the rest of the labor market looked very strong.
- Warmer weather likely boosted retail vehicle sales, which were stronger this January for both new and used vehicles.
- A strong pace of retail used sales kept wholesale used vehicle values stable every week in January, just as we forecasted.
The year of wild cards continued last week, with the chaos and long delay for results in the first presidential election primary in Iowa. One wild card was taken off the table when the impeachment trial ended with an acquittal for President Trump on both charges. The coronavirus is still spreading, but the stock market has been shrugging off any significant impact to the U.S. economy until the Fed issued a report highlighting that “[t]he effects of the coronavirus in China have presented a new risk to the outlook.”
Manufacturing rocky: Leading indicators for manufacturing started to signal a turnaround in January with the signing of the Phase 1 trade deal between the U.S. and China. However, manufacturing continued to lose jobs in January, and the impact from the coronavirus on supply chains worldwide was not yet evident.
The rest of the labor market looked very strong to start the year, aided in part by abnormally mild weather across the country. Job growth accelerated, labor force participation increased, and wage growth accelerated slightly.
Consumer credit expands: Consumer credit expanded substantially in December as consumers borrowed heavily on credit cards and leveraged other revolving debt sources resulting in the largest monthly growth in revolving debt balances since 1998.
Vehicle sales strong: Warmer weather also likely boosted retail vehicle sales, which were stronger this January for both new and used vehicles. Total new vehicle sales were down slightly in volume due to a decline year-over-year in sales into large fleets. Incentives were down from December’s record but were up substantially over last year. Inventories continue to fall, so the days’ supply is down substantially year over year.
Wholesale prices stable: A strong pace of retail used sales kept wholesale used vehicle values stable every week in January, just as we forecasted. The Manheim Used Vehicle Value Index increased modestly but registered a big year-over-year gain as a result of last January having seen substantial price declines. This was the best January for used vehicle value performance since 2015. The used trends bode well for a very strong tax refund season, which should start before the end of February.
Looking ahead: This week we will get consumer price index and retail sales data for January and the initial reading on consumer sentiment for February.