Auto Market Weekly Summary

While the number of COVID-19 daily new cases is increasing, the economy grew, consumers spent money, home sales rose, and jobless claims dropped to pre-pandemic levels.

GDP revised up: The second estimate of third-quarter real GDP resulted in an upward revision to growth of 2.1% annualized from the first estimate of 2.0%. Personal consumption was revised up to 1.7% from the original estimate of 1.6%.

Spending on goods was revised up to a decline of 8.4% from the original estimated decline of 9.2%, while spending on services was revised down to 7.6% from the originally estimated gain of 7.9%.

Gross private investment was revised down to a gain of 11.6% from an original estimate of 11.7%. The government spending increase was revised up to 0.9% from the originally estimated 0.8%. The modest revisions left real GDP growth year over year unchanged at 4.9%.

Spending grows: Consumer spending growth accelerated to 1.3% in October from an increase of 0.6% in September as personal incomes grew 0.5%. The growth in spending could have been influenced by an early start to holiday spending with supply shortages widely documented.

Government transfer payments were again a drag on income as they fell 0.5% as unemployment benefits declined 53% with the end of pandemic assistance in early September. Income from employment compensation again increased at a strong pace of 0.8%. Spending on durable goods rebounded and increased 3.3%, and spending on nondurable goods accelerated to a gain of 1.6%, and spending on services increased 0.9%. Spending on motor vehicles and parts increased 5.0% in October.

The personal savings rate declined to 7.3%, which is a low for the pandemic and now below the savings rate average of 7.5% in the 12 months leading to the pandemic. The Personal Consumption Expenditure Index, the key gauge of inflation that the Fed follows, increased 0.6% in October, which was an increase from a 0.4% increase in September. Overall price inflation according to the PCE increased to 5.0% year over year in October, which was the highest level since October 1990.

Home sales rise: Existing home sales increased in October when a decline had been expected. The pace of sales reached the highest pace of sales since January. The existing home sales SAAR increased 0.8% to 6.34 million. At the October rate, existing home sales were down 5.8% from a year ago but up 18.3% compared to October 2019.

Inventory declined to 1.25 million units, which was down 12.0% from a year ago.

The National Association of Realtors reported that 82% of the homes sold in October were on the market for less than a month, and the typical time on the market was 18 days, which was one day more than the record low that existed from April through September. The months’ supply of homes for sale remained 2.4 months, which was the tightest level of supply since April and less than half of what is considered normal. The median sales price increased to $353,900, which was up 13.1% from a year ago.

New home sales, which are based on new contracts signed on newly constructed homes, grew a weaker than expected 0.4% in October, and prior sales were revised down. New home inventory increased 2.9% and was up 37.0% year-over-year. New home supply increased to 6.3 months, which is close to normal. New home sales were down 23% from a year ago but were up 6% compared to 2019.

Jobless claims drop: As of November 13, 2.08 million Americans remain on traditional unemployment benefits, which are limited to at most six months of coverage. That number is the lowest for the pandemic and is now only 365,000 higher than the level of coverage prior to the pandemic.

The broadest measure of continuing benefits declined to 2.43 million, which was a new low for the pandemic and only 329,000 higher than the 2.10 million level prior to the pandemic. Initial claims declined last week to 199,000, which was not only a new low for the pandemic but a 52-year low in the seasonally adjusted number. The seasonally adjusted decline was a bit of a statistical quirk due to the timing of Veteran’s Day this year. The non-seasonally adjusted claims number increased week over week and remains slightly higher than the weekly average in 2020 in the weeks before the pandemic began.

Consumer sentiment mixed: The sentiment index from the University of Michigan reported a 6.0% decline in November as current conditions and expectations both declined, but the index improved in the second half of the month. The Morning Consult index daily index has modestly improved in November through Friday, as it increased 1.4% so far for the month.

An Auto Market Report video will be published in Smoke on Cars on Tuesday, December 7.