Auto Market Weekly Summary

The trend in new daily COVID-19 cases increased again last week, but the pace of increase slowed. Retail sales slowed, though spending remained relatively strong. Consumer sentiment declined again. Jobless claims fell. meanwhile, used-vehicle prices edged up again.

Retail sales slowed: Retail sales declined more than expected from June to July, but upward revisions to prior estimates meant that July sales were relatively close to expectations. The June increase was revised up to a 0.7% increase from an initially reported increase of 0.6%. The initial July estimate showed a seasonally adjusted total decline of 1.1%.

Auto sales again underperformed against other goods as sales excluding motor vehicles and parts declined 0.4% in July while sales of motor vehicles and parts were down 3.9%.

The biggest retail decliners in July besides auto included non-store (internet) retailers (-3.1%), clothing and accessories stores (-2.6%), sporting goods (-1.9%), and building material stores (-1.2%). The biggest category gainer in July was food service and drinking places (+1.7%).

Compared with a year ago, retail sales were up 16% in July against a time when most areas were re-opening last year. Compared to July 2020, no major category for retail sales was down

Used-vehicle prices edge higher: Used-vehicle sales have slowed since the peak frenzy in April when the market saw the best retail sales month in history. However, the pace of used retail sales in August has started stronger than in July, and the average listing price for used vehicles set another record in July as vehicle inventory remained tight, according to the Cox Automotive analysis of vAuto Available Inventory data. 

Manheim indicators are showing strengthening demand for wholesale vehicles compared to July. After declining 2.6% in July, the Manheim Used Vehicle Value Index declined only 0.8% in the first 15 days of August. Younger wholesale vehicles are seeing price gains, as the last two weeks produced a 0.4% aggregate increase in three-year-old Manheim Market Report (MMR) values. Retail prices have declined for four straight weeks following a peak in mid-July, but the pace of decline slowed last week following the shifting price trend in the wholesale market.

Jobless claims fall: As of August 14, 2.820 million Americans remain on traditional unemployment benefits, which are limited to at most six months of coverage. But 11.7 million people remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond six months. That broadest measure of benefits has declined by 830,000 over the last four weeks as many states elected to end enhanced unemployment benefits in June and July.

Initial claims also declined last week to 348,000, which was a new low for the pandemic. Weekly initial claims are finally moving closer to the level of claims prior to the pandemic beginning, but they remain elevated. Initial claims averaged 216,000 in the first 11 weeks of 2020 leading up to the pandemic

Consumer sentiment drops: The daily index of consumer sentiment from Morning Consult declined in each of the five days ending on Friday, August 20. That more than erased the slight improvement the prior week, as sentiment declined 1.2% in the last seven days ended last Friday. The decline leaves sentiment down 2.5% for the month after a 5.5% decline in July. The Morning Consult Index as of Friday was down 19.0% since February 29, 2020. The index level was where it was in early February.

New construction mixed: Residential construction trends were mixed again in July, but the trends in July were more encouraging about the longer term. The seasonally adjusted annualized rate of starts declined 7.0%, but permits increased 2.6%. After the July decline, starts were up 2.5% from last July and up 25% compared to July 2019.

Permits were up 6% year over year and up 19% compared to 2019. Permits lead starts, so the permitting pace at 1.635 million units was higher than the 1.534 million starts pace, and that is an indication that starts will increase in future months.

Material shortages and associated increases in costs, as well as labor shortages, have been holding back activity this year. Builders are also deliberately slowing sales of contracts on to-be-built homes. Single-family permits declined 2% in July while multi-family permits increased 11%. Compared to 2019, single-family permits were up 23%, and multi-family permits were up 14%. Multifamily trends are more volatile in this government data, but the improving trend in July is indicative of improving demand for rental.

An Auto Market Report video will be published in Smoke on Cars on Tuesday, August 31. Register for the Cox Automotive Q3 Forecast Call scheduled for Thursday, September 30 at 10 a.m. EDT.