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Smoke on Cars

Auto Market Weekly Summary

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Article Highlights

  1. New-vehicle sales were relatively decent in June. The SAAR ticked down slightly to 17.3 million from May’s 17.4 million, but it was up from 17.2 million in May 2018.
  2. Year to date, new-vehicle sales are down 1.9% as retail sales are down 3.5% but fleet sales are up 5.5%.
  3. The June average incentive spend at $3,826 per vehicle was the highest since December 2017.

Manufacturing has been the weakest part of the economy this year as trade issues have resulted in declining orders. Despite that weakness, the job market continues to be solid, albeit with decelerating gains. June saw rebounding job growth from May’s very low gain.

Low unemployment, stagnate wages: Despite low unemployment, wage growth is decelerating, which is another important sign that inflation is not a worry. After the employment data for June were released, the odds of seeing a half-point cut in rates at the July Fed meeting, according to the futures market, declined to less than 3%. The odds still heavily favor a quarter point cut, but with strong job growth, the Fed is less likely to be as aggressive despite other data showing a weakening economy and low inflation.

New-vehicle sales hold up: New-vehicle sales were relatively decent in June. Volumes were down 2% from a year ago with one less selling day. The SAAR ticked down slightly to 17.3 million from May’s 17.4 million, but it was up from 17.2 million in May 2018. Car sales posted sharp declines, down 8% compared to last year. Light trucks again outperformed cars and were up 1% year-over-year.

Retail sales were down 3% from a year ago, putting the retail SAAR at 14.1 million, down from 14.3 million in June 2018 but still its highest pace for this year. Fleet was less strong in June, but sales into rental – up 11% – helped fleet see a strong 5% year-over-year gain.

Year to date, new-vehicle sales are down 1.9% as retail sales are down 3.5% but fleet sales are up 5.5%.

Incentives up, inventories mostly down: The June average incentive spend at $3,826 per vehicle was the highest since December 2017. New-vehicle inventories came in under 4 million units for the second month in a row. Days’ supply for June was 67, which was down 1 day year-over-year and up three days from May. Average car days’ supply came in at 56 which was down 7 days year-over-year and up 2 days from May. Light truck days’ supply was 72, up 2 days from last year and up 4 days from May.

Looking ahead: This week, Cox Automotive released the June Manheim Used Vehicle Value Index and we’ll get the minutes from the Fed’s June meeting as well as data on inflation in June.

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