Auto Market Weekly Summary

Daily new COVID-19 cases continue an upward trend that is producing records. We saw more than 121,000 last Thursday and at this pace could see 200,000 by Thanksgiving. Hospitalizations are also at new records.

The job recovery continues, but the pace is slowing. More of the remaining 10.1 million jobs lost in the pandemic are now permanent. We continue to see an elevated number of weekly new jobless claims. The increase in COVID-19 cases and the uncertainty following the election contributed to declining consumer sentiment last week.

Jobs recovery slows: Jobs recovery slows: The pace of the jobs recovery slowed again in October, as the month saw 638,000 jobs created compared to a revised 672,000 in September. The prior two monthly numbers were revised up for a net increase of 15,000 jobs than originally estimated. Most private sectors added jobs in October, but the gains were mostly in leisure and hospitality, retail trade, temporary services, construction, and manufacturing. Auto dealers recovered 10,100 jobs, so dealership employment is now 6.5% below February’s employment level.

The headline unemployment rate declined to 6.9% in October. However, the Bureau of Labor Statistics reported that the rate could have been at most 0.3 points higher if not for misclassification due to confusion about people considered as employed but away from work. The underemployment rate, which is the broadest measure of unemployment declined to 12.1%. The percentage of the unemployed reporting being on temporary layoff, as opposed to permanent, also declined to 29%, which is a low for this recession. In April, 78% of unemployed expected their situation to be temporary.

The latest continuing claims data from the week ending Oct. 24 saw a decline of 538,000 claims. However, part of that decline reflects traditional state unemployment benefits ending for those who filed early in the pandemic. The broadest measure of continuing claims, which includes coverage as part of the pandemic assistance provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act has 21.5 million still on unemployment benefits. Initial claims for the week ending October 31 declined modestly to 751,000. While that number was the lowest level of initial claims in this recession, weekly initial claims never eclipsed 665,000 during the Great Recession.

New-vehicle sales up: New-vehicle sales were up by almost 1% in October compared with a year ago, with this October having one more selling day. That put the October SAAR at 16.2 million vehicles, compared with 16.8 million last October and a slight decline from this September’s 16.3 million.

Sales into fleets saw an improving trend while retail sales lost momentum. Combined sales into large rental, commercial, and government buyers were down 27% year-over-year in October. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail deliveries were up 5% year over year in October, leading to an estimated retail SAAR of 14.3 million, which was up from 14.1 million last October but down from September’s 14.4 million rate. For the year to date, we estimate that fleet sales are down 39%, while retail sales are down 12%, and the overall new vehicle market is down 17% so far this year

 Incentives were down 8% from September and 5% from a year ago.

Used sales soften: Used retail sales softened in October. Wholesale used prices saw relatively small declines for the season.

We initially estimate that used-vehicle sales were down 5% from last October. The October used SAAR was 37.5 million, down from 39.6 million last October and down from September’s 39 million. The October used retail SAAR estimate was 20.4 million, down from 20.6 million last year and down from September’s 20.7 million. CPO sales in October increased 1.4% from a year ago and 4% from September. CPO sales are down 6% for the year to date.

MUVVI rises: The Manheim Used Vehicle Value Index, which is seasonally adjusted, increased 0.47% in October from September. The increase brought the Index to 161.9, which was a 15.4% increase from a year ago.

On a year-over-year basis, all major market segments saw seasonally adjusted increases in October, but luxury cars and pickups again outperformed the overall market. The non-seasonally adjusted (NSA) monthly change was -1.9%, which was more in line with what we have been seeing in weekly price trends. The difference between the price metrics is primarily a result of the seasonal adjustment, which expects a larger decline in October. For example, across the full history of the Manheim Index, October has averaged a 2.1% monthly decline in the NSA price. Last year the October decline was 2.7%.

Consumer sentiment declines: The increase in COVID-19 cases and the uncertainty following the election contributed to declining consumer sentiment this week.

The index of consumer sentiment from Morning Consult saw big swings last week, increasing on Election Day but falling in the days since. The index declined 0.9% last Friday from Thursday’s reading, which left sentiment down 1.0% over the seven days ending last Friday. The final two days of last week ending Friday have seen the worst daily declines in almost six months. Sentiment is now down by 19.4% compared to the end of February. It is now down 0.8% from the end of September.

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