Auto Market Weekly Summary

Key Highlights

• U.S. housing market data reveal mixed signals, potentially influencing auto market recovery timelines.
• Jobless claims indicate a persistently softening labor market, raising concerns about consumer spending power.
• Consumer sentiment improves year over year, but expectations are mixed, impacting big-ticket purchases like vehicles.

Residential Construction Offers Mixed Signals

The latest housing market data highlights declining trends in residential construction, reflecting potential headwinds for auto sales recovery.

• Residential construction trends were mostly negative in October as total permits and starts both declined, but Hurricane Milton caused some of the decline, at least in starts.
• Total housing starts fell by 3.1% in October, exceeding analysts’ expectations of a 1.5% drop.
• Single-family housing starts dropped 6.9%, contrasting with a 9.6% rise in multifamily starts.
• While single-family permits increased slightly by 0.5%, multifamily permits declined by 3%, showcasing a broader contraction in the multifamily sector.
• Positive news for multifamily construction lies in the permit-to-start ratio, suggesting a potential uptick in upcoming activity.
• The data suggest the housing market, typically a bellwether for broader economic activity, is struggling to recover amid fluctuating conditions, including high interest rates and storm disruptions.

Existing Home Sales Show Resilience Amid Rising Inventories

Existing home sales provide some optimism, delivering stronger-than-expected growth in October.

• Existing home sales increased in October, but September’s sales were revised slightly lower. Inventory increased, but so did prices.
• Sales rose 3.4% month-over-month and 2.9% from the prior year to a seasonally adjusted annualized rate (SAAR) of 3.96 million units.
• Sales were up for the month in every region, with the Midwest up the most at 6.7%.
• Regional performance was robust year over year, with gains in all areas except the Northeast, where year-over-year growth was flat. The West led the increase, up 8.5%.
• Inventory levels climbed 19.1% year-over-year to their highest point since October 2020, offering buyers more options.
• Median home prices rose 4% from last year, reaching $407,200, balancing tight inventory with steady demand.
• These developments could underpin certain pockets of auto demand but remain sensitive to broader economic pressures.

Labor Market Faces Challenges Amid Rising Claims

Employment data signals ongoing weaknesses that could weigh heavily on consumer spending, pivotal for the auto industry.

• Jobless claims trends were mixed in the latest data from mid-November. Initial claims declined from increases caused by hurricane disruptions. However, continuing claims have increased and are at the highest level in three years.
• Initial jobless claims decreased modestly by 6,000 to 213,000 in the week ending Nov. 16, but the broader trend reflects labor market strain.
• Continuing claims rose by 36,000 to 1.91 million, marking a three-year high and highlighting growing economic fragility.
• Despite peaks caused by hurricanes, claims remain higher than pre-pandemic levels, signaling persistent challenges in job markets.
• That level of continuing claims was 148,000 more than it was prior to the pandemic and at the highest level in 3 years.
• The broadest measure of continuing claims increased by 1,900 to 1.68 million in the latest data, which lags the traditional number and is not seasonally adjusted.
• With declining job security, consumers may face greater hesitancy in making discretionary purchases like vehicles.

Consumer Sentiment Shows Year-Over-Year Recovery

Consumer sentiment saw modest gains in November, marked by mixed signals regarding economic conditions and inflation expectations.

• The full November reading of the University of Michigan’s Consumer Sentiment Index rose 1.8% to 71.8 for the month, reflecting a 17% increase compared to the same period last year, though the final reading fell short of earlier projections.
• Perceptions of current economic conditions declined, while expectations for the future improved, reaching their highest level since March.
• Consumers’ one-year inflation expectations eased slightly to 2.6%, down from 2.7%, yet five-year inflation expectations edged up to 3.2% from 3.0%.
• Consumers’ views of buying conditions for vehicles declined as views of interest rates declined but the view of buying conditions remained much better than a year ago.
• The daily index of consumer sentiment from Morning Consult exhibited similar November trends, rising 4.2% for the month yet slipping by 0.4% week over week. The index remained up 14.8% year over year.