Auto Market Weekly Summary

Key Highlights

• The auto industry is facing imminent tariffs on all imports, signaling significant changes ahead.
• Fourth quarter GDP growth was revised higher to 2.4%, but inflation trends remain a concern.
• Consumer confidence and sentiment have declined, with vehicle purchase plans at their lowest in two years.

We are ending March like we did February, with tariffs on autos just around the corner, but this time, it’s on all imports, and it looks like this is really happening.

Economic Overview

The third and final estimate of fourth-quarter data revised real GDP growth higher to 2.4%, a deceleration from the 3.1% rate in the prior quarter. There were small changes in the underlying data, but the headline estimate of inflation was revised down. If only those trends would continue.

• Personal consumption was revised down to 4.0% from 4.2%.
• Spending on goods was revised up to 6.2% from 6.1%.
• Gross private investment saw a slight upward revision to a decline of -5.6%.

Consumer Spending and Income Growth in February

Consumer spending increased 0.4% in February following a downwardly revised decline of 0.3% in January.

• Personal income growth accelerated to 0.8% from 0.7%.
• Employee compensation growth accelerated to 0.5%.
• Government transfer payment growth was steady and strong at 1.8%, driven by strong growth in Medicaid payments and a jump in other transfers.
• Proprietors’ income saw weak growth of 0.1%.
• Personal dividend income growth decelerated to 0.2%, but interest income growth was steady at 0.5%.
• Factoring in inflation, real spending increased 0.1% in February, which was weaker than expected following a downwardly revised 0.6% decline in January.

Spending on Goods and Services

Spending on goods increased 0.9% following a 1.7% decline in January, while spending on services decelerated to growth of 0.2% from 0.4%.

• Spending on durable goods increased 1.4% following a 4.3% decrease.
• Spending on nondurable goods increased 0.6% following a decrease of 0.2%.
• Spending on motor vehicles and parts increased 1.7% after an 8.1% decrease.

Savings Rate and Inflation

The savings rate increased to 4.6%, which was the highest level in eight months.

• The Personal Consumption Expenditure Index, the key gauge of inflation that the Fed follows, was steady at 0.3% growth as expected.
• Overall price inflation according to the PCE was steady at 2.5% year over year, as expected.
• The core inflation rate accelerated to 2.8%, which was more than expected.
• The monthly change in the core inflation rate accelerated to 0.4% from 0.3%, which was more than expected.

Housing Market

New home sales and pending home sales (new contracts on existing homes) increased in February. It was a better month for home sales, but sales remain depressed.

• New home sales at an annualized pace of 676,000 were up 1.8% month over month but up 5.1% year over year.
• Sales increased 20.6% for the month in the Midwest and 6.6% in the South but declined 13.6% in the West and 21.4% in the Northeast.
• Year over year, sales were down in the Northeast (-48.8%) and West (-11.4%) but up in the South (+19.0%) and the Midwest (+2.7%).
• New home inventory increased 0.8% month over month and was up 7.5% year over year.
• New-home supply declined to 8.9 months from 9.0 months in January, which is considered elevated.
• With existing and new home sales increasing in February, total home sales increased 3.8% for the month but were down 0.3% year over year.
• Pending home sales increased 2.0% in February, which was stronger than expected, but were down 3.6% year over year.
• Pending home sales declined for the month in the Northeast and the West but were up in the South and the Midwest.
• Every region was down year over year, with the Midwest down the most (-4.7%) and the Northeast down the least (-2.5%).

Consumer Confidence

Consumer confidence and sentiment declined in March, with plans to purchase a vehicle declining to the lowest level in two years, but that was before tariffs were put in place on every imported vehicle.

• The Conference Board Consumer Confidence Index® declined 7.2% in March, worse than expected, with February’s index revised higher, and was down 9.9% year over year.
• Consumers’ views of the present and future both declined, with future views reaching the lowest level since 2013.
• Plans to purchase a vehicle in the next six months declined modestly to the lowest level since April 2023.
• The sentiment index from the University of Michigan declined 11% in February to 57.0, marking a larger decline than the earlier reading at the beginning of the month.
• The index is down 28% year over year to the lowest level since November 2022.
• Expectations for inflation in one year increased to 5% from 4.3%, and expectations for inflation in five years increased to 4.1% from 3.5%.
• Consumers’ views of buying conditions for vehicles declined to the lowest level since November 2022 as views of prices deteriorated, but views of interest rates improved slightly.
• The daily index of consumer sentiment from Morning Consult declined 2.1% in March as of March 28, leaving it up only 3.0% 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.