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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Fourth-quarter real GDP was revised upwards.
  2. Personal income growth slows and spending rebounds in February.
  3. The auto market is expected to close Q1 on a strong note.

The fourth-quarter real GDP was revised upwards to a 3.4% annualized gain, an increase from the 3.2% second estimate. Personal consumption was revised up to 3.3% from 3.0%.

In February, income growth decelerated to a 0.3% gain, a decrease from 1.0% in January, which was driven by large increases in Social Security and Medicare payments. Meanwhile, consumer spending growth rebounded in February from weather disruptions in January, with spending on goods being revised down to 3.0% from 3.2%. Spending on services was revised up to 3.4% from 2.2%.

Vehicle sales in March were forecast by Cox Automotive to increase 4.5% year over year. The Industry Insights team’s quarterly call was held on Thursday, March 28, and a replay is now available. Official results from many of the major automakers will be reported this week.

Q4 GDP Revised Upward

The fourth-quarter real GDP was revised to a 3.4% annualized increase from the 3.2% second estimate. Personal consumption was revised to an increase of 3.3% from 3.0%. Gross private investment was downwardly revised to an increase of 0.7% from 0.9% as inventories were revised down. Real GDP growth year over year was unchanged at 3.1%, and growth for all of 2023 remained at 2.5%.

Personal Income Growth Slows and Spending Rebounds in February

Personal income growth decelerated in February to a 0.3% gain from 1.0% in January, which was driven by large increases in Social Security and Medicare payments. Employee compensation growth accelerated to 0.7% from 0.4% in January, but government transfer payments in February increased only 1.0% month over month after rising 2.5% in January, and unemployment compensation declined 1.7%. Personal income from dividends and interest income both fell.

Meanwhile, spending on durable goods in February increased 1.4% month over month, while spending on nondurable goods increased 0.1%. Spending on services increased 0.9%. Spending on motor vehicles and parts increased 3.9% in February, following a downwardly revised decline of 5.8% in January.

With faster spending growth and slower income growth, the personal savings rate declined to 3.6%, the lowest since December 2022.

Interest Rates Moderate in March

The 10-year U.S. Treasury declined 5 basis points (BPs) in March to 4.20%, leaving it up 32 BPs in 2024. The 10-year peaked at 5.02% in late October 2023.

The average mortgage rate declined 19 BPs in March to 6.91%, up 31 BPs year over year. Mortgage rates peaked in the current cycle at 8.03% in mid-October.

The volume-weighted average new auto loan interest rate declined 4 BPs to 9.68% in the most recent measure in March, leaving it up 76 BPs year over year. The average new rate peaked at 9.95% in mid-October. On the used-vehicle side, loan rates had declined 33 BPs to 14.26% in the latest measure in March, down slightly from the 24-year peak of 14.59% in February. Used auto loan rates were up 24 BPs year over year in the latest measure.

Auto Market Expected to Close Q1 on a Strong Note

Sales volume in March, when announced early next month, is expected to show gains over March 2023 and 2022 as the market continues to expand. The forecast of 1.45 million sales in March represents an increase of 4.5% year over year and suggests March 2024 will generate sales close to the 10-year average for the month, historically one of the strongest sales months in a given year.

Healthy sales are being supported by significantly improved new-vehicle inventory levels. At the beginning of March, the total supply of available new vehicles was up more than 50% compared to last March, according to the latest vAuto Live Market View data.

For more on Q1 market performance, watch the replay of the Q1 2024 Cox Automotive Industry Insights and Sales Forecast call, which was held on Thursday, March 28.

Housing Market Down Versus 2023

New home sales declined slightly in February and were weaker than expected. Measures of sales in January, however, were revised up. New home sales, at an annualized pace of 662,000, were down 0.3% from the revised January number but were up 5.9% year over year. Compared to February 2019, new home sales were down 17.5%.

Existing home sales saw strong gains in February, so total home sales were up 8.1% for the month but were down 2.2% versus 2023.

Pending home sales – new contracts signed on existing homes – rebounded in February. Pending home sales increased 1.6% when a 1.5% increase had been expected. However, pending home sales were down 2.2% year over year. The trend in pending home sales varied by region of the country, with the Northeast and West declining but the Midwest jumping and the South increasing. All regions saw declines versus year-ago levels.

Consumer Confidence Measures Mixed in March

Measures of consumer confidence were again mixed in March, but the timeliest reading indicated improvement.

The Conference Board Consumer Confidence Index® declined 0.1% in March, as views of the present situation improved, but views of the future declined. Consumer confidence was up 0.7% year over year. Plans to purchase a vehicle in the next six months increased slightly from last month but was flat versus 2023.

According to the sentiment index from the University of Michigan, consumer sentiment improved in March. The Michigan index increased 3.8% for the month and was up 28.1% compared to year-ago levels. The consumer’s view of buying conditions for vehicles increased to the highest level since June 2021 as views of interest rates were less negative.

The daily index of consumer sentiment from Morning Consult increased through March and left the daily index up 15% year over year. It’s worth noting that Morning Consult surveys many more consumers over the full course of the month. The daily index increased 1% from the end of February.

Gas prices increased in March. The national average price for unleaded gas from AAA increased 6.2% from the end of February to $3.54 per gallon as of March 28, which was up 1% versus March 2023.

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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