Auto Market Weekly Summary

Key Highlights

• Headline inflation rose by 0.2% in October, with significant contributions from shelter and transportation costs.
• Retail sales in the auto sector increased by 1.6% in October, outpacing the broader market.
• Auto loan performance remains weak, with 60-day+ delinquencies rising for the sixth consecutive month.

Inflation Rises

The auto industry is experiencing price dynamics influenced by inflation trends.

• Headline inflation rose by 0.2% in October, as expected, with significant contributions from shelter and transportation costs, according to the consumer price index (CPI). On a year-over-year basis, the overall CPI increased to 2.6% from 2.4% in September.
• The core CPI, which excludes Food and Energy, accelerated to an increase of 0.3%. Core CPI was steady year over year at 3.3% in September.
• Transportation accelerated to a gain of 0.3% from a decline in August as used-vehicle prices surged by 3.1%, aligning with earlier gains on the Manheim Used Vehicle Value Index.
• New-vehicle prices slightly declined by 0.1% following a gain in September.
• Motor vehicle parts and repair also saw a strong gain, but motor vehicle insurance only had a small increase of 0.1%.
• Retail new-vehicle prices are increasing, but incentives are increasing as well, while used retail and wholesale vehicle prices declined in October.

Retail Sales Increase

The auto sector showed robust performance in retail sales, outpacing the broader market.

• The initial retail sales report for October indicated a stronger-than-expected 0.4% monthly gain, with the auto sector contributing significantly.
• Sales of motor vehicles and parts increased by 1.6%, while sales excluding motor vehicles and parts rose by 0.1%.
• Eight of the twelve major retail categories saw sales increases, with motor vehicles and parts, and food service and drinking places experiencing the largest gains.
• Retail sales were up 2.8% year over year on a nominal basis, with nonstore retailers showing the highest category increase at 7.0%.

Auto Loan Performance Remains Weak

Auto credit is likely to remain tight because auto loan performance continues to be weak.

• The rate of 60-day and longer delinquencies rose for the sixth consecutive month, impacting overall loan stability.
• Delinquency rates for subprime auto loans increased slightly to 7.44% in October.
• Despite high delinquency rates, defaults have not reached record levels, though, at an annualized default rate of 3.48%, they are significantly higher than pre-pandemic figures.
• The year-to-date default rate is 3.11%, which is closest to the default rate of 3.18% in 2007.

Consumer Sentiment Improves

The index of consumer sentiment from Morning Consult has shown significant improvement through mid-November, reflecting growing consumer confidence.

• The index increased by 1.4% in September and October and is up 4.6% in November, leaving sentiment up 14.5% year-over-year.
• This positive trend indicates that consumers are feeling more optimistic about the economy and their financial situations.

Gas Prices Decline

The average unleaded gas price, according to AAA, has declined, providing some relief to consumers.

• Gas prices have decreased by 1.2% month-to-date, reaching $3.08 per gallon as of Nov. 14.
• Gas prices are down 8% year over year, which is a significant drop and beneficial for consumers’ budgets.

Jobless Claims Decrease

Seasonally adjusted initial jobless claims have declined, indicating a potential improvement in the labor market.

• Initial jobless claims declined by 4,000 to 217,000 for the week ending Nov. 9, which is 6,100 more than in 2020 before the pandemic began but is off the recent peaks caused by hurricanes.
• Non-seasonally adjusted initial claims increased by 16,700 but were 15,700 lower than they were before the pandemic.
• Continuing claims declined by 11,000 to 1.87 million as of Nov. 2, which is 113,000 more than it was before the pandemic but is off recent highs.
• The broadest measure of continuing claims increased by 30,600 to 1.67 million in the latest data, which lags the traditional number and is not seasonally adjusted. This total measure is up 36,200 over the last four weeks but is 430,000 lower than the pre-pandemic level.
• The labor market has been deteriorating this year, with claims increasing and lasting longer. After disruptions from hurricanes Helene and Milton, the latest data reflect declining trends in claims from recent highs.

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.