Auto Market Weekly Summary

Highlights

1. Housing Market Fluctuations: Both existing and new home sales declined in April, with inventory levels increasing, which could be linked to high mortgage rates.
2. Durable Goods Orders: Despite a monthly increase in April, durable goods orders are down year over year, sending mixed signals for the manufacturing sector.
3. Labor Market Stability: Initial jobless claims have decreased slightly, but continuing claims indicate that the labor market is not as robust as it was pre-pandemic.

Housing Market Insights

Existing Home Sales

• Decline in April: The existing home sales seasonally adjusted annual rate dropped by 1.9% to 4.14 million, compared to 4.22 million in March.
• Regional Variations: Sales decreased across all regions, with the Northeast experiencing the largest drop at 4.0%.
• Inventory Increase: Existing home inventory rose by 9.0% to 1.21 million units, marking a 16.3% year-over-year increase and the highest level since October 2022.
• Median Sales Price: The median price increased to $407,600, up 5.7% year over year.

New Home Sales

• Unexpected Decline: New home sales fell by 4.7% month over month and 7.7% year over year to an annualized pace of 634,000.
• Regional Differences: Sales were down in the West and South and unchanged in the Northwest. The Midwest saw a 10% increase.
• Inventory Levels: New home supply increased to 9.1 months, the highest level since November 2022.

Overall Home Sales

• Combined Decline: Total home sales (existing + new) fell by 2.3% for the month and 2.7% year over year.
• Mortgage Rate Impact: High mortgage rates above 7% over the last two years have contributed to inventory increases.

Economic Indicators

Durable Goods Orders

• Monthly Growth: Durable goods orders rose by 0.7% in April, beating expectations.
  
• Year-over-Year Decline: Despite the monthly growth, orders are down 0.9% year over year.
  
• Sector Performance: All major categories increased in the month. Motor vehicles and parts orders increased by 5.1% year over year, which indicates continued production and supply growth. The view year over year was less positive as total orders were down 0.9%, with transportation the main negative, driven primarily by weakness in aircraft orders at Boeing.

Jobless Claims

• Initial Claims: Seasonally adjusted initial jobless claims declined by 8,000 to 215,000 for the week ending May 18.
• Continuing Claims: Increased by 8,000 to 1.79 million as of May 11, which is higher than pre-pandemic levels.
• Overall Labor Market: While claims are lasting longer, labor stress remains limited.

Consumer Sentiment

University of Michigan Index

• Monthly Decline: According to the sentiment index from the University of Michigan, consumer sentiment declined by 10.5% in May compared to April.
• Year-over-Year Improvement: The index was up 17.1% year over year despite the monthly decline.
• Inflation Expectations: Median consumer expectation for inflation in a year rose to 3.3%, the highest since November, while 5-year expectations remained steady at 3.0%.

Morning Consult Index

• Volatility: The daily index of consumer sentiment from Morning Consult showed a 1.5% decline for the month but was up 5.3% year over year.

Gas Prices

• Slight Decline: The national average price for unleaded gas decreased by 1.5% from the end of April to $3.61 per gallon as of May 23.

Conclusion

This week’s economic data shows a mixed picture. The housing market continues to face challenges with declining sales and increasing inventory, influenced by high mortgage rates. While durable goods orders have shown some monthly growth, the year-over-year decline and persistent issues in specific sectors like aircraft manufacturing suggest underlying weaknesses. The labor market remains relatively stable, though not as strong as before the pandemic, with initial and continuing claims providing crucial insights. Consumer sentiment indicates cautious optimism tempered by concerns over rising inflation and interest rates.

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.