Auto Market Weekly Summary

Daily new COVID-19 cases continue an upward trend that is producing records. We saw more than 186,000 on Thursday. At this pace, we will likely see 200,000 today or tomorrow. Hospitalizations are also at new record highs, and daily deaths are rising.

Consumer sentiment plummets: This third and bigger wave of COVID-19 is taking a toll on consumer sentiment. The index of consumer sentiment from Morning Consult lost further ground last week. The daily index as of last Friday was down 3.2% from the week earlier. Sentiment is at its lowest point since mid-August and is now down by 22.7% compared to February.

Jobs recovery stalls: The jobs recovery may be hitting a wall. Some 20.3 million Americans remain on some form of unemployment assistance, with 13.1 million people likely losing support at the end of December. We continue to see an elevated number of weekly new jobless claims, and the number is now increasing again. Initial claims increased last week to 742,000, which is very high by historical standards and moving in the wrong direction.

Retail sales slow: Retail sales decelerated in October, posting a weak 0.3% increase in October, which was weaker than the consensus expectation. Auto sales outperformed the overall increase as sales, excluding motor vehicles and parts, increased 0.2% while motor vehicles and parts were up 0.4%. The biggest category gainers were non-store retailers electronics, appliances and building material and garden suppliers. The biggest monthly decliners were department stores, sporting goods stores and clothing stores. With the weak increase, retail sales are up 5.7% year over year. Categories with the largest year-over-year declines in October were gas stations, restaurants, clothing stores and department stores.

Construction increases: New construction increased again in October, reaching new multi-year highs, but the gap between permits and starts is narrowing, pointing to a pipeline that’s no longer growing. All of the growth is in single-family, as multifamily is declining. Low mortgage rates and increased demand for single-family homes and second homes have been helping new single-family construction grow since April. Multifamily is dealing with weakening demand for apartments as lower-wage workers have been hardest hit in the pandemic and as more people prefer to move out of denser urban areas.

Home sales rise: Existing home sales increased again in October for the fifth straight month. The pace of existing home sales is now up 26.6% from a year ago and is at the highest level since November 2005. Inventory declined 2.7% and was down 19.8% year over year. The National Association of Realtors also reported that more than 7 in 10 of the homes sold in October 2020, or 72%, were on the market for less than a month. The months’ supply of homes for sale declined to 2.5 months, which is a new record low and less than half of what is considered normal. The median sales price hit a new high and represented a 15.5% year-over-year gain. Home sales improved in every region but were up the most in the Midwest and the Northeast.

Used vehicles stall: Used-vehicle prices have declined so far in November but at a slightly lower than normal pace for this time of year. Used retail sales lost momentum as November progressed and retail supply is now slightly above normal when looking at days’ supply. We continue to see used-vehicle prices decreasing modestly in both the wholesale and retail market. However, the seasonally adjusted Manheim Used Vehicle Value Index increased 0.3% comparing the first 15 days of November to the month of October. The non-seasonally adjusted (NSA) monthly change was -0.9%. The difference between the two metrics is largely a result of the seasonal adjustment, which expects a larger decline in November. For example, across the last 5 years, the Manheim Index has averaged a 1.0% monthly decline in the NSA price in November.