- Daily new cases of COVID-19 overall are down but rising in some markets.
- Jobless claims rise to nearly 39 million in two months.
- Auto sales and our leading indicators show that May has continued to build on the improvement that began in April.
The peak in daily new COVID-19 cases was four weeks ago. Case growth appears to be on a declining trend for the U.S. overall, but individual markets have their own unique pandemic curves.
Some markets are seeing more cases reported not only as a function of outbreaks, but also as a function of increases in testing. More businesses are opening up, producing increases in economic activity. We continue to see improvement in auto sales.
Still, the damage to the economy can be seen in declining new residential construction and existing home sales and continued growth in unemployment.
More jobless claims: Initial jobless claims were 2.4 million for the week ending May 15, a decline from the prior week’s downwardly revised 2.7 million. A total of 38.6 million claims have been filed in nine weeks, representing 24% of February’s job total. A total of 25.1 million remain on unemployment benefits.
Consumer sentiment improves: Consumer sentiment improved this past week, but it remains down significantly since the end of February.
Auto sales rise: Auto sales and our leading indicators show that May has continued to build upon the improvement that began in April. Used vehicle values have started to recover. We estimate that new-vehicle sales through last Wednesday are down 32% year over year, while used vehicle sales are down only 6% year over year. Though both metrics are down, they are much improved from the past couple months.
Consumers retreat on credit: Consumers pulled back on credit card spending in March. Banks are tightening standards on auto loans. The delinquency rate on auto loans fell in April, but part of the decline was because of loan accommodations.
The Federal Reserve reported that Consumer Credit, excluding housing-related debt, declined in March by $12 billion, the biggest decline since June 2009. A massive decline in credit card balances of $28.2 billion offset a $16.1 billion gain in auto loans and student loans. Auto loans grew despite the decline in vehicle sales in the second half of the month as lockdowns started in most areas of the country. Meanwhile, banks are tightening credit.
Delinquencies fall: Auto loan delinquency rates fell again in April and are at the lowest level in 10 months. However, some of the improvement is a result of loan accommodations. In April, 1.39% of auto loans were severely delinquent, while 4.87% of subprime loans were severely delinquent. Both rates were higher than last April. The subprime delinquency rate in April was the highest for the month going back to 2006.
Manheim Index increases: The Manheim Used Vehicle Value Index increased 5.7% comparing the first 15 days of May to the month of April. This brought the Index to 133.0, which is down 4.8% from May 2019. If the mid-month value of the Manheim Index holds for the full month, the monthly increase will set a record. The prior increase record was 4.5% in January 2009. Recovering wholesale demand is reducing the big price cuts we had been seeing in the second half of March and in April. As used retail sales have been strongly recovering, retail supply has fallen to below normal levels.
Housing declines: Residential construction declined again in April, but the underlying data points to April being the bottom. The decline in housing starts, which was the largest such decline in the data back to 1959, pushed activity to the lowest level in more than five years. Existing home sales declined again in April, the largest monthly decline since July 2010. April was likely the bottom for both.