Auto Market Weekly Summary

Highlights

• Job growth for April decelerated, falling short of expectations and adjusting down previous estimates, contributing to a broader discussion on labor market trends and economic indicators.
• The Federal Reserve left rate policy unchanged at the conclusion of their meeting last week and acknowledged a lack of progress in achieving their 2% inflation target.
• The automotive sector presents a mixed picture, with new-vehicle sales slowing and new-vehicle prices ticking upward in April. Fleet sales deteriorated further relative to the overall market.

Job Growth and Unemployment Dynamics

April’s job growth has taken a significant dip, falling below expectations and revising down the tally of previous months, contributing to a broader discussion on labor market trends and economic indicators as viewed through the lens of vehicle sales, Federal Reserve policies, and average transaction prices in the auto industry.

• April saw 175,000 jobs created, a figure notably lower than the anticipated 240,000.
• The unemployment rate slightly increased from 3.8% to 3.9%, with the labor force participation rate holding steady at 62.7%.
• The three-month moving average of new jobs fell to 242,000, which was the slowest pace in four months.

Federal Reserve’s Stance and Inflation Concerns

• The Federal Reserve maintains its interest rate policy amidst slow progress towards its 2% inflation target, hinting at future rate cuts possibly starting from July. [See the commentary published last week: Deflation and Fed’s Lack of Urgency Are Putting Durable Goods at Risk]
• A dovish approach toward quantitative tightening was unexpectedly adopted, influenced by April’s labor market softness.
• The Fed remains “on pause,” but understands rates are restrictive and need to be cut at some point this year.

Auto Industry Insights and Pricing Trends

• New light vehicle sales dropped by 3.3% year over year in April, with the initial estimated average transaction price rising to $48,510 – the highest mark since December but down 0.5% year over year. (The full Kelley Blue Book price report will be posted next week.)
• Despite a slight year-over-year decrease in average transaction prices, incentives from manufacturers remained significantly higher than the previous year.
• The average price relative to the average manufacturer’s suggested retail price (MSRP) moved up to 97.6% as the level of discounting declined modestly. The average MSRP increased 2.2% in April and was up 1.3% year over year.
• Fleet sales overall declined 5.6% compared to last year, with notable differences across rental, commercial and government segments.
• Sales into large rental fleets were down 2.0% year over year, while sales into commercial fleets were down 14.3%, but sales into government fleets were up 8.3%.

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.