Auto Market Weekly Summary

Key Highlights:

• Consumer spending on motor vehicles and parts declined 0.6% in April, easing back after a sharp 9.8% surge in March, suggesting a return to more typical demand levels.
• Vehicle purchase intent improved in May, with plans to buy a vehicle in the next six months reaching their highest level since December.
• Real personal income growth and a rising savings rate point to stronger household balance sheets, which could support future auto demand despite recent spending pullbacks.

GDP

The decline in real GDP in the first quarter was revised down slightly in the second estimate, but the decline was mainly an accounting technicality based on surging imports.

• Real GDP for Q1 2025 was revised to a 0.2% decline, down from the initial 0.3% estimate.
• The downward revision was driven by weaker consumer spending, which grew just 1.2%, down from 1.8%.
• Goods spending was nearly flat at 0.1%, while services spending slowed to 1.7%.
• Gross private investment was revised up sharply to 24.4%, reflecting a larger-than-expected inventory build ahead of anticipated tariffs.
• Year over year, real GDP growth was revised slightly higher to 2.1%.
• The core personal consumption expenditures (PCE) index was revised down to 3.4% year over year, while the headline PCE remained at 3.7%.

Personal Income and Spending

Consumer spending growth decelerated in April following a surge in March. Year-over-year measures of inflation that the Fed follows closely showed the lowest levels of inflation in more than 4 years. Income growth remains strong, and the savings rate is rising after declining for most of the last year.

• Consumer spending rose 0.2% in April, following a strong 0.7% gain in March.
• Personal income growth accelerated to 0.8%, up from a revised 0.7% in March.
• Employee compensation remained steady and strong, increasing 0.5%.
• Government transfer payments jumped 2.8%, driven by Social Security and Medicaid.
• Proprietors’ income growth slowed to 1.3%, down from 1.7%.
• Dividend income declined 1%, while interest income growth slowed to 0.1%.
• Spending on goods fell 0.1% after a 1% increase in March.
• Spending on services grew 0.4%, down from 0.6% the previous month.
• Durable goods spending declined 0.3% after a 3.7% surge.
• Nondurable goods spending was flat, following a 0.4% decline.
• Spending on motor vehicles and parts dropped 0.6%, following a 9.8% spike in March.
• The savings rate rose to 4.9%, the highest level in 11 months.
• The PCE price index, the Fed’s preferred inflation gauge, rose 0.1% in April.
• Year over year, overall PCE inflation declined more than expected to 2.1%, the lowest since February 2021.
• Core PCE inflation slowed to 2.5% year over year, with a 0.1% monthly increase.
• Real (inflation-adjusted) spending rose 0.1% in April, which was stronger than expected, following a 0.7% gain in March.

Pending Home Sales

Pending home sales declined in April in every region of the country.

• Pending home sales dropped 6.3% month over month, reversing gains from the previous two months.
• March’s increase was revised down, and year over year, pending sales were down 2.5%.
• All regions posted monthly declines, with the West seeing the steepest drop at 8.9%.
• The Midwest was the only region with a year-over-year gain (+2.2%), while the West was down 6.5%.
• Higher mortgage rates, driven by rising bond yields, have dampened demand even as inventory builds.

Consumer Confidence

Consumer confidence showed strong improvement in May.

• The Conference Board Consumer Confidence Index^® jumped 14.4% in May—the strongest monthly gain since March 2021.
• Optimism about both current conditions and future expectations improved, with future sentiment up 31%.
• Plans to purchase a vehicle within the next six months rose to the highest level since December, although they are still slightly down year over year.
• The University of Michigan’s sentiment index held steady at 52.2, better than expected, with improved future expectations offsetting weaker views on current conditions.
• Inflation expectations were mixed: one-year expectations rose slightly to 6.6%, while five-year expectations eased to 4.2%.
• The daily index of consumer sentiment from Morning Consult declined 6.5% in May as of May 30 but remained up 10.7% year over year.
• Gas prices provided some relief, with the national average for unleaded down 0.8% month over month as of May 29 and 11% year over year to $3.16 per gallon.

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.