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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Q1 GDP growth slowed more than forecast in Q1.
  2. Personal income increased month over month in March, but personal savings took a hit due to higher spending.
  3. While overall home sales are down year over year, new-home sales picked up strongly in March.


  • Q1 GDP growth slowed more than forecast.
  • Personal income increased month over month in March, but personal savings took a hit due to higher spending.
  • While overall home sales are down year over year, new-home sales picked up strongly in March.
  • Consumer sentiment has declined in April but remains up year over year.

First Estimate of Q1 GDP Growth Slowed More Than Expected

The first estimate of Q1 real GDP performance showed a bigger deceleration in growth than expected, falling to an annualized rate of 1.6% from 3.4% in the fourth quarter. Personal consumption decelerated to growth of 2.5%, a decline from 3.3% in Q4.

Spending on goods also decelerated, falling to a 0.4% decline from 3.0% growth in the prior quarter, while spending on services accelerated further to growth of 4.0% from 3.4%. Accelerating residential investment drove a 3.2% increase in private domestic investment despite declining inventories. Government spending decelerated in Q1 but remained positive. Exports increased less than imports, so net exports were also a drag on growth. Real GDP growth year over year decelerated to 3.0% from 3.1% previously.

GDP price measures, which are quarterly but consistent with the monthly PCE measures that the Fed follows closely, showed troubling reacceleration in inflation as the GDP price index grew 3.1%, up from 1.6% in Q4. The core price index accelerated to 3.7% from 2.0% in the prior quarter. The Federal Reserve meets this week to discuss interest rates and inflation. [Check back in the Newsroom on Wednesday afternoon for related commentary.]

Personal Income Grew Month over Month in March

Personal income grew 0.5% in March, up from growth of 0.3% in February. Employee compensation growth decelerated to 0.6% from 0.7%, while government transfer payment growth decelerated to 0.3% from 1.0% in February. Proprietors’ income increased 0.3%, which was down from a downwardly revised 0.4% gain in February. Personal income from interest income declined at the same pace as February, but income from dividends grew 0.3% in March after declining in February.

Consumer spending remained robust in March and exceeded expectations. Spending on goods accelerated to a growth of 1.3%, while spending on services decelerated to a growth of 0.6%. Spending on motor vehicles and parts decelerated to growth of just 0.3% following a downwardly revised increase of 3.0% in February.

With faster spending growth and slower income growth, the personal savings rate declined to 3.2%, which was the lowest since October 2022.

The Personal Consumption Expenditure (PCE) Index, the key gauge of inflation that the Fed follows, increased 0.3% in March, which was the same as in February and as expected. Overall price inflation, according to the PCE, increased to 2.7% year over year, while the core inflation rate remained at 2.8%. Factoring in inflation, real spending increased by 0.5% in March, the same as in February.

New Home Sales Pick Up in March

New home sales increased strongly in March and were better than expected, but prior sales in February were revised down. New home sales at an annualized pace of 693,000 were up 8.8% month over month and up 8.3% year over year. With faster sales, the new-home supply declined to 8.3 months from 8.8 months in February. Existing home sales fell in March, so total home sales were down 2.7% for the month and down 2.1% versus 2023.

Like new home sales, pending home sales increased 3.4% when a smaller 0.4% increase had been expected. With the rise, pending home sales were up 0.1% year over year.

Consumer Sentiment Declined In April but Remains Higher Year Over Year

According to the sentiment index from the University of Michigan, consumer sentiment declined 2.8% in April but was up 21.2% versus one year ago. The median consumer expectation for inflation in a year jumped to 3.2%, its highest level since November, and the expectation for five years increased to 3.0%, also the highest since November. The consumer’s view of buying conditions for vehicles declined to the lowest level since December as views of interest rates and prices both deteriorated.

The daily index of consumer sentiment from Morning Consult has been very volatile in April and has shown a 1.5% decline for the month as of Friday, April 24, leaving the index up 9.5% year over year. Gas prices have increased in April, with the AAA national average estimate for unleaded gas at $3.66 per gallon as of April 25, which was up 1% year over year and higher by 3.5% from the end of March.

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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