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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. New-vehicle sales improved in February from January.
  2. Real economic growth remains at a strong level.
  3. Consumer confidence metrics were mixed but mostly improved.

The new-vehicle seasonally adjusted annual rate (SAAR), or sales pace, improved to 15.8 million in February, up from 15.0 million in January, which was impacted by winter weather. An update on new-vehicle sales in February was published this morning.

Real GDP growth in the fourth quarter of 2023 was revised down slightly to 3.2%, which represented a slowing from the third quarter but a still very strong level of growth. All components of GDP were positive contributors, and in the revisions, consumer spending was stronger than originally estimated.

Consumer spending growth decelerated in January, but income growth accelerated, supported by growth in Social Security and Medicare payments. The savings rate increased slightly. Some of the decline in spending was weather-related. While the monthly change in Personal Consumption Expenditures (PCE) measures of inflation in January saw accelerating increases, the year-over-year levels were lowest since February and March of 2021.

New home sales increased slightly in January, while pending home sales declined.

Measures of consumer confidence were again mixed in February, but the most timely reading indicated improvement, and all measures are higher year to date.

Real Economic Growth Remains at a Strong Level

The increase in the fourth-quarter real GDP was revised down to a 3.2% annualized increase from the 3.3% originally estimated. Personal consumption was revised up to a rise of 3.0% from 2.8%.

Growth in spending on goods was revised down to 3.2% from 3.8%. Spending on services was revised up to a gain of 2.8% from 2.4%. Gross private investment was downwardly revised to an increase of 0.9% from 2.1% as inventories were revised down. Real GDP growth year over year was revised down to 3.1% from 3.3%.

Real GDP growth for all of 2023 remained at 2.5%.

Consumer Spending Growth Decelerated as Personal Income Grew

Consumer spending growth decelerated in January as expected, but personal incomes grew much more than expected.

Personal income growth accelerated to a 1.0% gain from 0.3% in December. Employee compensation growth decelerated to 0.4% from 0.5% in December. Government transfer payments increased 2.6% after growing just 0.1% in December, but unemployment compensation declined 0.8%. The gains in government payments were from Social Security and Medicare. Proprietors’ income declined 0.2%, which was down from a downwardly revised 0.1% decline in December. Personal income from dividends increased, but interest income growth declined.

Growth of spending on goods decelerated to a decline while spending on services accelerated. Spending on durable goods declined 1.2%, while spending on nondurable goods declined 0.8%, and spending on services increased 1.0%. Spending on motor vehicles and parts declined by 4.6%, following a gain of 1.6% in December. With faster income growth but slower spending growth, the personal savings rate increased to 3.8%, which was still much lower year over year.

The Personal Consumption Expenditure Index (PCE), the key gauge of inflation that the Fed follows, increased 0.3% following a downwardly revised 0.1% in December. According to the PCE, overall price inflation declined to 2.4% from a year ago, while the core inflation rate declined to 2.8% from 2.9%. PCE measures of inflation are at the lowest year-to-year levels since February and March 2021, when inflation took off after Russia invaded Ukraine. Factoring in inflation, real spending declined 0.1% in January.

New Home Sales Increased in January

New home sales increased in January, but the prior sales were revised down. New home sales at an annualized pace of 661,000 were up 1.5% from December 2023 and up 1.8% from a year ago.

Compared with January 2019, new home sales were down 16.2%. New home inventory increased 0.9% from the previous month and was up 3.9% from a year ago. New-home supply was steady at 8.3 months. Both new and existing home sales saw modest gains in January, so total home sales were up 2.9% for the month but down 1.2% from a year ago.

Like new home sales, pending home sales are new contracts signed on existing homes, but they declined in January. Pending home sales declined 4.9% when a 1.5% increase had been expected. Pending home sales were down 8.8% from a year ago.

The trend in pending home sales varied by region of the country, with the Northeast and West increasing but the Midwest and South declining in January. All regions saw declines from a year ago, with the Midwest down the most and the Northeast down the least.

Consumer Confidence Shows Signs of Improvement From Last Year

The Conference Board Consumer Confidence Index® declined 3.8% in February, as views of the present situation gave up some of January’s gains and views of the future also declined. Consumer confidence was up 3.2% from a year ago. Plans to purchase a vehicle in the next six months increased and was up substantially from a year ago.

Consumer sentiment, according to the sentiment index from the University of Michigan, also declined in February. The Michigan index declined 2.7% for the month but was up 14.9% from a year ago. The median consumer expectation for inflation in a year increased to 3.0%, but the expectation for five years remained at 2.9%. The consumer’s view of buying conditions for vehicles increased to the highest level since July 2021 as views of prices and interest rates were less negative.

The daily index of consumer sentiment from Morning Consult increased in February and left the daily index up 11.4% from a year ago. The divergence with the other two indices is likely related to the timing of when surveys are collected. All the indices are up so far in 2024. The daily index increased 2.8% from the end of January. Gas prices increased in February. The national average price for unleaded gas from AAA increased 5.7% to $3.33 per gallon as of February 29, which was down only 1% from a year ago.

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.

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