- The coronavirus situation remains dynamic and uncertain.
- Consumers trim spending; tax refunds arriving slowly.
- Home sales were strong in January.
The coronavirus captured most of last week’s headlines. The situation remains dynamic, and the future is uncertain. It is unclear how it will impact the U.S. economy and auto market.
If the U.S. does not see a severe outbreak leading to U.S. travel restrictions and quarantines like China, South Korea, Japan and Italy have seen, then the impact to the U.S. economy and auto market should be subdued. Nevertheless, the cascading issues around the world will cause the U.S. economy to see less growth, and new-vehicle sales could fall from the 16.6 million in our current forecast.
Consumers spend less: Economic growth is no longer seeing the same support from consumer spending as spending growth continued to decelerate in January despite an uptick in income growth.
Confident consumers: Consumer confidence and sentiment both improved modestly in February, but all the February surveys reflect data collected prior to this week when concerns about a global pandemic from the coronavirus sent stock markets down swiftly around the world.
Strong home sales: Home sales were strong in January, as consumers responded to lower mortgage rates.
Tax refunds arriving: This calendar week should be approaching the critical mass on tax refunds received to trigger the seasonal jump in used-vehicle sales. However, since refunds seem to be coming in a bit slower this year, the jump may come next week instead.
Looking ahead: This week we will get the February employment report and February new-vehicle sales, used-vehicle sales, and used-vehicle prices along with critical updates on the coronavirus and its impact on the financial markets and outlook.