Auto Market Weekly Summary

Key Highlights

• The second fourth-quarter estimate kept real GDP growth at 2.3%, a deceleration from the 3.1% rate in the prior quarter.
• January saw a decline in consumer spending, which was below expectations, and spending on motor vehicles and parts fell 5.2%.
• Consumer confidence declined in February, with plans to purchase a vehicle declining to the lowest level since last February, when they were slightly lower.

Economic Growth and Inflation

February flew by, and much like it started, we’re ending with anxiety about possible tariffs on Mexico and Canada around the corner.

• The second fourth-quarter estimate kept real GDP growth at 2.3%, which was a deceleration from the 3.1% rate in the prior quarter. There were small changes in the underlying data, but the inflation estimates increased.
• Personal consumption was unrevised at 4.2%.
• Spending on goods was revised down to a 6.1% increase from a 6.6% increase.
• Spending on services was revised up to a gain of 3.3% from 3.1%.
• Gross private investment was revised down slightly to a decline of 5.7%.
• Real GDP growth year over year was unchanged at 2.5%.
• The core personal consumer expenditure index was revised up to 2.7% year over year from 2.5%, and the headline price index was revised up to 2.4% from 2.2%.

Consumer Spending and Income

Consumer spending in January fell and was weaker than expected. Personal income growth jumped, driven mainly by increases in social security and Medicaid. The savings rate increased.

• Consumer spending declined 0.2% in January following an upwardly revised strong gain of 0.8% in December.
• Personal income growth accelerated to 0.9% from 0.4%.
• Government transfer payment growth jumped to 1.8% from 0.3%, driven by growth in social security and Medicaid payments while unemployment compensation declined.
• Proprietors’ income increased 1.5% following an increase of 0.7%.
• Personal interest income growth decelerated to 0.4%, but dividend income jumped 1.7% following a decline in December.
• Spending on goods declined 1.2% following 1.2% growth in December while spending on services decelerated to growth of 0.3% down from 0.7%.
• Spending on durable goods declined 3% following a 1.3% increase.
• Spending on nondurable goods decreased 0.2% following growth of 1.2%.
• Spending on motor vehicles and parts declined 5.2% after a 2.6% increase.
• The savings rate increased to 4.6%, which was the highest level in seven months.

Housing Market Trends

New-home sales and pending home sales (new contracts on existing homes) declined in January. It was a rough month for home sales with harsh winter weather and higher mortgage rates.

• New-home sales at an annualized pace of 657,000 were down 10.5% month over month and down 5.7% year over year.
• Sales increased 7.7% for the month in the West but declined in every other region and were down the most, 20%, in the Northeast.
• Sales were down year over year in the Northeast (-48.1%) and Midwest (-13.6%) but up in the South (+6.8%) and the West (+3.1%).
• New-home inventory increased 1.4% month over month and was up 7.4% year over year.
• New-home supply declined to 8.0 months from 8.6 months in December. This level of supply is considered elevated.
• With existing and new-home sales declining in January, total home sales declined 5.7% for the month but were up 1.6% year over year.
• Pending home sales declined 4.6% and were down 5.2% year over year. Pending home sales declined in every region of the country except in the Northeast where they were up a meager 0.3%. The South was down the most (-9.2%).
• Every region was down year over year with the South down the most (-8.8%) and the Northeast down the least (-0.5%).

Consumer Confidence

Consumer confidence declined in February, with plans to purchase a vehicle declining to the lowest level since last February, when they were slightly lower.

• The Conference Board Consumer Confidence Index® declined 6.6% in February, which was worse than the decline expected, but January’s index was revised higher.
• Consumers’ views of the present and of the future both declined, but the views of the future declined the most.
• Consumer confidence was down 6.2% year over year.
• Plans to purchase a vehicle in the next six months declined modestly to the lowest level since last February but plans to purchase were slightly higher year over year.
• The daily index of consumer sentiment from Morning Consult declined 1.7% in February, adding to the slight 0.1% decline in January. The index ended the month up 6.3% year over year.
• As of Feb. 27, the national average price for unleaded gas, according to AAA, increased by 0.4% in February from the end of January to $3.11 per gallon, representing a 6% decrease compared to the same period last 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.