Auto Market Weekly Summary

This summary features updated Q2 GDP data, more housing data from July, personal income, spending, and inflation data from July, and readings on consumer sentiment in August. The housing data was weak, but little changed. Consumer spending and income growth accelerated in July, with inflation picking up slightly as expected. Measures of consumer sentiment were mixed in August but the most timely read, including more improvement over the last 10 days, suggests sentiment is holding up.

Q2 GDP Growth Revised Upward; July Home Sales Weak, Consumer Income and Spending Accelerate

The second estimate for second-quarter GDP growth shows a stronger performance than initially reported. Meanwhile, July experienced weak home sales but saw accelerating consumer income growth and spending. Consumer sentiment remained stable at the end of August.

The increase in second-quarter real GDP was revised to 3.3% in the second estimate from the 3.0% originally estimated.

• Personal consumption was revised up to growth of 1.6% from 1.4%.
• Spending on goods was revised up to a 2.4% increase from a 2.2% increase, and spending on services was revised up to a gain of 1.2% from 1.1%.
• Gross private investment was revised up to a decrease of 13.8% from 15.6% as businesses invested more in structures, equipment, and intellectual property than originally estimated.
• Real GDP growth year over year was revised slightly higher to 2.1% from 2.0%.
• The core personal consumer expenditure index was unchanged at 2.5% year over year, and the headline price index was unchanged at 2.0%.

New home sales decreased 0.6% in July from an upwardly revised pace of 656,000 in June to an annualized pace of 652,000 and were down 8.2% year over year.

• Sales varied by region with the only gain being 11.7% in the West with no change for the month in the Northeast and declines of 6.6% and 3.5% respectively in the Midwest and South.
• Sales were up 4.9% year over year in the Midwest but down in every other region, with the Northeast down the most at 23.5%.
• New home inventory decreased 0.6% month over month but was up 7.3% year over year. New-home supply was steady at 9.2 months and remains elevated.

Total home sales increased 1.7% for the month but were down 0.6% year over year, with existing home sales increasing and new home sales decreasing slightly in July. Total sales levels have been very stable but at low levels since March.

Pending home sales decreased 0.4% but were up 0.7% year over year. Weak pending home sales point to continued weakness in existing home sales.

• The trend varied by region, with the West up 3.7% for the month, but every other region down, with the Midwest down the most at 4.0%.
• The trend year over year also varied, with the South up the most at 1.8% but the West down the most at 1.9%.

Consumer spending increased 0.5% in July following an upwardly revised 0.4% increase in June. Personal income increased 0.4% as expected following a 0.3% increase in June.

• Employee compensation growth accelerated to 0.6% from 0.2% previously.
• Government transfer payments were unchanged as Social Security payments declined 0.8% and unemployment compensation declined 0.3%.
• Proprietors’ income grew 0.7% following a 0.1% increase previously.
• Personal dividend income growth increased 0.3% and interest income declined 0.1%, while the savings rate was steady at 4.4%.
• Spending on goods increased 0.8% following an increase of 0.3% while spending on services saw steady growth of 0.4%.
• Spending on durable goods accelerated to growth of 1.9% from a 0.8% decline previously. Spending on nondurable goods increased 0.1% following a 0.9% increase in June.
• Spending on motor vehicles and parts increased 4.8% following a 3.5% decline.
• The Personal Consumption Expenditure (PCE) Index, the key gauge of inflation that the Fed follows, increased 0.2% as expected.
• Overall price inflation, according to the PCE, was steady at 2.6% year over year as expected.
• The core inflation rate increased to 2.9% from 2.8% as expected, with an increase of 0.3% for the month.
• Factoring in inflation, real spending increased 0.3% in July as expected, which was an acceleration from 0.1% previously.

Consumer confidence improved in July.

• The Conference Board Consumer Confidence Index decreased 1.3% in August but was better than expected, as July was revised up. Consumer confidence was down 7.8% year over year.
• Consumers’ views of the present and of the future both declined similarly.
• Plans to purchase a vehicle in the next six months increased and was higher year over year.
• The sentiment index from the University of Michigan decreased 5.7% in August to 58.2, which was lower than expected and marked a decrease from the earlier reading at the beginning of the month. The index was down 14.3% year over year.
• The underlying views of current conditions and future expectations both declined, with current conditions declining the most.
• Expectations for inflation in one year increased to 4.8% from 4.5%, and expectations for inflation in five years increased to 3.5% from 3.4%.
• Consumers’ views of buying conditions for vehicles declined to the lowest level in three months as views of prices and interest rates both deteriorated.
• The daily index of consumer sentiment from Morning Consult has increased 0.2% this month as of Aug. 29, with daily improvement in 7 of the last 10 days, leaving the index up 4.9% year over year.
• The national average price for unleaded gas has increased 1.9% this month as of Aug. 27 from the end of July to $3.20 per gallon, according to AAA, which was down 5% year over year.

Bottom line: Despite weak housing data, the U.S. economy showed resilience in July with stronger-than-expected GDP growth, accelerating consumer income and spending, and stable sentiment – signaling continued consumer strength amid persistent economic uncertainty.

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.