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Auto Market Weekly Summary


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The trend in new daily COVID-19 cases stopped declining with cases increasing slightly last week. Consumer sentiment improved slightly, but measures of consumer sentiment show mixed trends in June.

Consumer spending was unchanged in May as incomes slid with less government support. Inflation in May was at the highest level in more than a decade. The savings rate declined but remains elevated.

Existing and new home sales declined again in May, as housing strength continues to fade with mortgage rates off the lows recorded in 2020, and supply challenges have led to record prices.

Consumer spending unchanged: Consumer spending was unchanged in May versus April as personal income fell 2% and disposable income fell even more as households are transitioning from abnormal income support from stimulus in the first quarter. The decline in personal income was driven by a 38% decline in other government transfer payments, but unemployment benefits declined 7.3% while wages increased by 0.8%.

Spending on durable goods declined 2.8% in May, while spending on non-durable goods fell 0.4%, and spending on services increased 0.7%. Spending on motor vehicles and parts declined 5.9%.

The personal savings rate declined to 12.4% from 14.5% in April but remains higher than the savings rate average of 7.4% in the 12 months leading to the pandemic. The Personal Consumption Expenditure (PCE) Index, the key gauge of inflation that the Fed follows, increased 0.4% from April. Overall price inflation according to the PCE increased to 3.9% year over year in May to the highest level since July 2008. The Fed’s target is an average inflation level over time of 2%.

Home sales decline: Existing and new home sales declined again in May, as housing strength fades with mortgage rates off the lows recorded in 2020, and supply challenges have led to record prices.

Existing home sales fell for the fourth month in a row in May. The existing home sales SAAR declined 0.9% to 5.80 million, which was the slowest pace since June 2020. At this rate, existing home sales were up 44.6% from a year ago and up 7.2% compared to May 2019. Inventory increased to 1.23 million units. May inventory was down 20.6% from a year ago.

The National Association of Realtors reported that 89% of the homes sold in May were on the market for less than a month, and the typical time on market was 17 days, which was unchanged from April and still a record low. The months’ supply of homes for sale increased to 2.5 months which is the highest since September but still less than half of what is considered normal. The median sales price, now at a record $350,300, represented a 23.6% year-over-year gain. Home sales were down in every region except the Midwest.

New home sales, which are based on new contracts signed, declined 5.9% in May. The decline was worse than expected, and the prior decline in April was revised to a larger decline. New home inventory was up 2.9% compared to April and up 5.8% from a year ago. New home supply increased to 5.1 months, which is the highest level since May 2020. In May, 36% of the new homes sold were on homes not yet started, while 40% were under construction, and only 24% were completed, finished units. With the decline in May, new home sales were up 9% from a year ago and up 24% compared to 2019.

Jobless claims fall: New jobless claims fell and resumed the downward trend that should continue until claims are back down to where they were prior to the pandemic starting.

As of June 12, 3.39 million Americans remained on traditional unemployment benefits, which are limited to at most six months of coverage, but 14.8 million people remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond 6 months.

That broadest measure of benefits has declined by 957,000 over the last four weeks. Initial claims declined last week to 411,000, after increasing the prior week likely because of reporting gaps during the Memorial Day holiday week. Weekly initial claims remain elevated as they averaged 216,000 in the first 11 weeks of 2020 leading up to the pandemic.

Consumer sentiment mixed: The final reading on Consumer Sentiment from the University of Michigan increased 3.1% in June from May and left sentiment down 15.3% from February 2020. The index reflected a decline from the original estimate earlier in the month. The measures for current conditions declined for the month, while future expectations improved.

The index of consumer sentiment from Morning Consult has measured a slight decline thus far in June. The Morning Consult Index was up 0.1% week to week as of last Friday and is down 1.0% for June and down 12.5% since Feb. 29, 2020.

GDP unchanged: The third and final estimate of the first quarter real GDP increase was left unchanged from the first estimate of 6.4% (annualized). Personal consumption was revised up to 11.4% from the second estimate of 11.3% as increasing government transfer payments and increasing activity especially in March drove a surge in consumer spending. Spending on goods was revised up to a gain of 26.6% while spending on services was revised down to 4.2% from the originally estimated gain of 4.6%.

Gross private investment was revised up to a decline of 3.4%. The government spending increase was revised down to 5.7%. Real GDP growth year over year remained 0.4%.

The Mid-Year Review, hosted by Jonathan Smoke and the Industry Insights team, is today at 11 a.m. EDT. Register to attend. Also, an Auto Market Report video will be published in Smoke on Cars on Wednesday, July 7.

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