Auto Market Weekly Summary

The stock market kept its winning streak alive with gains for a second week, mainly as a result of optimism about progress with U.S.-China trade talks since a meeting is being planned to continue negotiations in October. The market seemed to shrug off the actual implementation of new tariffs by both the U.S. and China on Sept.1. Real progress this year is doubtful.

Hurricane Dorian produced devastating damage in the Bahamas, but so far, the U.S. has avoided major problems.

Jobs created: The pace of job creation continues to slow, but job losses are not mounting and unemployment remains near 50-year lows. The labor force is actually expanding and thus keeping the unemployment rate from dropping further. Wage growth is not accelerating and creating inflation worries, but it has remained above 3% now for more than a year which helps the average consumer have more to spend.

Fed rates: The Fed is acknowledging slower economic growth with more risks due to trade uncertainty and is guiding the market to expect a rate cut later this month. The market expects more cuts before the end of the year. A recession is not a given, but if trade uncertainty continues to cause businesses to slow or even cut investment, meager job gains could turn into job losses. The average consumer is in good shape now, and the economy is even more dependent on continued consumer spending. We’ll get some important reads on the consumer in August later this week.

New-vehicle sales rise: We do know that the consumer bought vehicles in August. Enticed by the highest incentives in 20 months, retail sales increased 9% y/y in August. CPO sales increased even more year-over-year.

In total, new vehicle sales increased 11% year-over-year in August thanks to one more selling day and Labor Day weekend falling within the month compared to last year. Fleet sales had another big growth month as commercial (+10%) and rental (+45%) powered fleet up 23% year-over-year in August.

The strong sales in August helped trim inventories to the lowest level in three years. Supply is now down from a year ago, even for light trucks. That means manufacturers may not need to keep incentive spending so strong in future months.

August was a good month for the auto market as consumers and manufacturers alike made the most of the Labor Day weekend. It could have been even better had Florida not been in storm preparation mode during the final days of August.

Looking ahead: This week we’ll get August inflation data, retail sales, and the first estimates of September consumer sentiment. We will also release the August Manheim Used Vehicle Value Index.