Auto Market Weekly Summary

Key Highlights:

• Declining vehicle sales drove the retail sales decrease in May, but inflation-adjusted sales remained higher compared to last year.
• The Fed remains on hold as it monitors inflation and labor data.
• Auto loan rates are unlikely to ease anytime soon as the Fed holds steady amid a more pessimistic economic outlook.

Retail Sales

Retail sales in May declined more than expected, driven mainly by declining vehicle sales. Adjusting for inflation, retail sales were still higher year over year.

• Total retail sales fell 0.9% month over month, following a downwardly revised 0.1% decline in April.
• The auto sector was the primary drag, with motor vehicles and parts sales down 3.5%.
• Excluding autos, retail sales were down just 0.1% month over month.
• Six of the twelve major retail categories posted monthly declines, with building materials and garden supplies down 2.7%.
• Miscellaneous store retailers posted the largest monthly gain at +2.9%.
• On a nominal basis, retail sales were up 3.3% year over year, down from 5.0% in April.
• Gas stations (-6.9%) and building materials (-1.1%) were the only categories down year over year.
• E-commerce (+8.3%) and health and personal care stores (+7.7%) led year over year gains.
• Adjusted for inflation using the CPI, retail sales declined 1.0% month over month but were up 0.9% year over year.

New Construction

Residential construction declined in May as permits and starts both fell. Multi-family shows more promise for near-term growth.

• Housing starts fell 9.8% month over month, significantly worse than the expected 0.8% decline.
• Permits dropped 2.0% month over month, despite expectations for no change.
• Multi-family starts plunged 29.7%, while single-family starts edged up 0.4%.
• Year over year, total starts were down 4.6%, with single-family starts down 7.3% and multi-family starts up 4.1%.
• Permits were down 6.4% year over year for single-family and up 10.5% for multi-family.
• The monthly pace of permits was 1.256 million units, trailing the 1.393 million starts pace, suggesting further declines in starts ahead.
• Multi-family permits (495,000) outpaced starts (332,000), while single-family permits (898,000) lagged starts (924,000).
• This dynamic points to continued weakness in single-family construction and potential growth in multi-family, which is needed to help contain shelter inflation.

The Fed

The Fed remains on hold on cutting rates as they await data on inflation that reflects the impact from tariffs, while they also monitor labor market conditions. The outlook is not good for relief on auto loan rates anytime soon.

• At its fourth meeting of 2025, the Federal Open Market Committee left interest rates unchanged for the fourth consecutive time. [See commentary: Latest Ne-Rate-Change Decision Marks Start of a Long Summer of Waiting.]
• The Fed’s updated forecasts reflected a more pessimistic outlook: slower economic growth, higher inflation, and rising unemployment.
• Policymakers are unlikely to cut rates before year-end, especially as they await clearer inflation signals and labor market trends.
• Longer-term bond yields are also unlikely to decline meaningfully, with upward pressure from growing federal deficits and increased Treasury issuance.

Jobless Claims

Continuing jobless claims remain near the highest level in four years as hiring has slowed, leaving more job losers on unemployment benefits for a longer time.

• Initial jobless claims for the week ending June 14 fell by 5,000 to 245,000.
• This level is 32,900 higher than pre-pandemic 2020 but 14,000 below the fall 2024 hurricane-driven peak.
• Non-seasonally adjusted initial claims dropped by 10,200 and were 9,500 below pre-pandemic levels.
• Continuing claims decreased by 6,000 to 1.95 million as of June 7, still 192,000 above pre-pandemic levels.
• The broadest measure of continuing claims rose by 70,700 to 1.85 million, up 46,700 over the past four weeks but still 248,000 below pre-pandemic levels.

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.