Auto Market Weekly Summary

Key Highlights:

• The first estimate of GDP for the first quarter showed a decline in the economy, but it was mainly an accounting technicality based on surging imports.
• Job growth remained strong in April and exceeded expectations, while the unemployment rate and wage growth remained steady year over year.
• The new-vehicle SAAR declined modestly in April but remained up substantially year over year.

GDP and Spending

The first estimate of GDP for the first quarter showed a decline in the economy, but it was mainly an accounting technicality based on surging imports. The data show that tariffs are having an impact, and besides surging imports, consumer spending is slowing.

• The first estimate of first quarter real GDP growth showed a decline as seasonally adjusted annualized growth was -0.3% following growth of 2.4% in the prior quarter.
• The decline was driven by a surge in imports, which increased inventories and private domestic investment.
• Personal consumption decelerated to growth of 1.8% from 4.0% but was stronger than expected.
• Spending on goods decelerated to 0.5% growth from 6.2% growth in the prior quarter, while spending on services decelerated to growth of 2.4% from 3.0%.
• Government spending declined 1.4% from growth of 3.1% previously.
• Real GDP growth year over year decelerated to 2.0% from 2.5%.
• The GDP price index grew 3.7%, up from 2.3% in Q4.
• The core price index accelerated to 3.5% from 2.6% in the prior quarter.

Consumer Spending

While the GDP data showed that consumer spending growth slowed in Q1, it accelerated in March following an upwardly revised and strong February.

• Consumer spending increased 0.7% in March following an upwardly revised increase of 0.5% in February.
• Spending on goods accelerated to growth of 0.9% from 0.7%, while spending on services accelerated to growth of 0.6% from 0.5%.
• Spending on durable goods jumped 3.2% following 0.9% previously.
• Spending on nondurable goods declined 0.4% following an increase of 0.5%.
• Spending on motor vehicles and parts increased 7.7% following a 0.7% increase.

Personal Income and Savings

Personal income growth decelerated, but the savings rate increased to its highest level in eight months.

• Personal income growth decelerated to 0.5% from a downwardly revised 0.7%.
• Employee compensation growth accelerated to 0.5% from 0.4%.
• Government transfer payment growth decelerated to 0.2%.
• Proprietors’ income jumped 1.8% from prior growth of 0.3%.
• Personal dividend income growth accelerated to 0.4%, and interest income growth was steady at 0.4%.
• The savings rate increased to 4.6%, the highest level in eight months.

Inflation and Consumer Prices

Year-over-year measures of inflation that the Fed follows closely showed declines.

• The Personal Consumption Expenditure (PCE) Index, a key gauge of inflation, was unchanged as expected.
• Overall price inflation, according to the PCE, declined to 2.3% year over year, with core inflation decelerating to 2.6%.
• Factoring in inflation, real spending increased 0.7% in March, which was stronger than expected following a weak 0.1% increase in February.

Employment Trends

Job growth remained strong in April and exceeded expectations while the unemployment rate was steady and wage growth year over year was steady. The bite from tariffs is yet to be evident in the labor market data.

• The economy added 177,000 jobs in April, surpassing the expected 138,000.
• The private sector contributed 167,000 jobs, while the government added 10,000.
• The headline unemployment rate remained steady at 4.2%, with the labor force participation rate increasing to 62.6% from 62.5%.
• Employment at auto dealers declined by 2,100 jobs, leaving employment down 16,200 or 1.2% below the February 2020 level.
• The three-month moving average of new jobs increased to 155,000, which is below the 2019 average but at the level needed to sustain full employment.
• Participation is down 0.7 percentage points from before the pandemic and represents 1.9 million fewer people in the labor force compared to then, despite having added 7.2 million jobs.
• The under-employment rate declined to 7.8% from 7.9% and is now 0.8 percentage points above where it was in February 2020.
• Monthly average hourly earnings growth decelerated to 0.2% from 0.3% and was weaker than expected.
• Earnings growth year over year was steady at 3.8%.
• The most worrisome trend in the April report was a rise in the share of the unemployed who have been permanently laid off.

New-Vehicle Sales

The new-vehicle seasonally adjusted annual rate (SAAR) declined modestly in April but remained up substantially year over year.

• The SAAR for new vehicle sales declined slightly in April but remained significantly higher compared to the same period last year.
• More details on new and used vehicle sales will be reported next week, as we have more complete data for the month.

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.