Auto Market Weekly Summary

The peak in daily new COVID-19 cases was six weeks ago, the recovery in jobs is encouraging and the rebound in automotive sales is impressive, but consumers may still be wary, particularly in light of social unrest.

COVID-19 cases decline: The number of new daily COVID-19 cases peaked six weeks ago on April 24. The growth generally in new cases has been on the decline for weeks. However, it has been an inconsistent trend as testing continues to grow, and some areas are seeing outbreaks. The protests over the last week may lead to more cases. 

Jobless claims down: We are seeing an encouraging recovery in jobs, and the recovery in the auto market so far has been impressive. However, the number of unemployed is still far worse than in the Great Recession. Now we must see how many jobs are brought back and how quickly. 

May began the recovery in jobs from the historic losses incurred in March and April. The recovery started faster than analysts had expected as 2.5 million jobs were created – or restored – instead of the 7 million more losses that had been expected. The prior two monthly numbers were revised down for a net decrease of 642,000 fewer jobs than originally estimated. 

Job gains/recoveries in May were highest in food services, leisure and hospitality, construction, healthcare, retail, and manufacturing. Auto dealers recovered nearly 85,000 jobs. 

The headline unemployment rate declined to 13.3%. The underemployment rate, which is the broadest measure of unemployment declined to 21.2%. Initial jobless claims were 1.9 million for the week ending May 29, which was a decline from the prior week’s 2.1 million. A total of 21.5 million remain on unemployment benefits in the latest data, which represents 14.1% of February’s payrolls.

Consumer sentiment choppy: Consumer sentiment declined last week as protests drew attention to social injustice following the death of George Floyd. The daily index of consumer sentiment from Morning Consult lost nearly a point last week as social unrest is weighing on the minds of consumers. The index is down 23% since the end of February. It had its highest level since March 23 at the end of May.

Vehicle sales improve: New- and used-vehicle sales improved in May from April, the low point. Auto sales and Cox Automotive’s leading indicators show that we are starting June relatively strongly although some of the trends are mixed.

May total new-vehicle sales were down 30% year over year with the same number of selling days compared with May 2019. The May SAAR came in at 12.2 million, a decrease from last year’s 17.4 million but an improvement from April’s 8.6 million rate and better than March’s 11.4 million. 

Combined rental, commercial, and government purchases of new vehicles were down 83% year over year. Retail sales of new vehicles were down 16% year over year in May, leading to an estimated retail SAAR of 11.6 million, down from 14.0 million last May but up from April’s 7.9 million rate. Fleet sales are down 38% in 2020 through May, while retail sales are down 19%, as the overall new-vehicle market is down 23% so far this year.

New-vehicle inventories fall: New-vehicle inventories came in around 2.6 million units. Days’ supply for May was 62, down two days year over year and down 59 days from April. Average car days’ supply came in at 65, up 11 days year over year and down 56 days from April. Light truck days’ supply was 61 last month, down seven days from last year and down 60 days from April. 

Incentives dip from April: Average incentive spend came in at $4,168, up 12% year over year but down 3% from April, likely related to lower inventories. 

Used-vehicle sales up from April: Our initial estimates show that used-vehicle sales declined by 22% compared with last May. We estimate that the May used SAAR was 32.0 million, down from 39.2 million last May but up from 27 million in April. The May used retail SAAR estimate is 16.7 million, down from 21.0 last year but up from April’s 14.4 million. CPO sales decreased 5.7% from a year ago but were up 87% from April.

Used-vehicle values rise: The Manheim Used Vehicle Value Index increased 8.96% in May. This brought the Index to 137.0, which was a 1.9% decrease from a year ago. On a year-over-year basis, all major market segments saw declines, but luxury cars declined less than the overall market. 

The weekly Manheim Market Report (MMR) price indices saw gains each week in May. MMR Retention, which is the average difference in price relative to current MMR, was greater than 100% in all but three days in May and averaged 101.7% for the month.

Check back on Smoke on Cars tomorrow for a video that will include updated data.