Auto Market Weekly Summary

The peak in daily new COVID-19 cases was more than two weeks ago, and now it appears that hospitalizations and deaths are no longer growing either. It also appears that the jobs recovery may also be improving again, albeit at a slower pace than we enjoyed in the spring. The country now has 16.1 million on unemployment benefits, but those benefits are now less robust. Consumer sentiment has also increased slightly.

However, Congress failed to reach an agreement on a new stimulus package, so uncertainty related to the unemployed and how that will impact the economy is a top concern for August.

Job recovery slows: The pace of the jobs recovery slowed substantially last month. July saw 1.76 million jobs created (or recovered) compared to June. The prior two monthly numbers were revised up for a net increase of 17,000 more jobs than originally estimated.

Most sectors added jobs in July, but July’s gains were largest in leisure and hospitality. Government (mainly local education), retail, healthcare, and temporary employment saw the next largest gains. Auto dealers recovered 16,600 jobs, so dealership employment is now 9.5% below February’s employment level.

The headline unemployment rate declined to 10.2%. The underemployment rate, which is the broadest measure of unemployment, declined to 16.5%. More than half (57%) of the unemployed report being on temporary layoff. While this percentage remains high, it is coming down as the volume and share of permanent job losers is growing.

Vehicle sales improve: New and used vehicle sales improved again in July. Supply has tightened dramatically, and the tight supply is causing record used car prices.

July total new vehicle sales were down 12% year over year with one more selling day compared to July 2019. The July SAAR was 14.5 million, a decrease from last year’s 17.0 million but an improvement from June’s 13.1 million.

Combined sales by large rental, commercial and government buyers declined 40% in July compared with a year ago, but that was far better than the last three months, as sales to commercial fleets improved and were only down 6% from a year ago. The remaining retail sales of new vehicles were down 8% from a year ago, leading to an estimated retail SAAR of 13.3 million, down from 14.8 million last July but up from June’s 12.1 million rate.

Year to date, fleet sales are down 43%, retail sales are down 17%, and the overall new vehicle market is down 22% so far this year.

Vehicle inventories low: New vehicle inventories came in at about 2.5 million units. Days’ supply for July was 54, down 12 days from a year ago and four days from June.

Average car days’ supply stood at 55, down two days year over year and down six days from June. Light truck days’ supply was 53 last month, down 17 days from last year and down five days from June.

Average incentive spend was $3,987, up 2% from a year ago but down 2% from June.

Used vehicle sales: Our initial estimates show that used vehicle sales were down only 4% from July a year ago. The July used SAAR was 38.0 million, down from 39.7 million last July but up from 36 million in June. The July used retail SAAR estimate was 20.4 million, down from 20.8 last year but up from June’s 18.9.

CPO sales increased 7.8% from a year ago but were down 2.5% from June. For the year to date, CPO sales are down 9%.

Manheim index increases: The Manheim Used Vehicle Value Index increased 5.84% in July from June. This brought the Index to 158.0, which was a 12.5% increase from a year ago.

On a year-over-year basis, most major market segments saw seasonally adjusted increases, but luxury cars and pickups outperformed the overall market. Weekly Manheim Market Report (MMR) price indices saw gains each week in July. MMR Retention was greater than 100% every day but one in July and averaged 102.5% for the month.

Consumer sentiment stable: The index of consumer sentiment from Morning Consult increased 0.1% over the last seven days. The index has been stable for most of the last two weeks.

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