Auto Market Weekly Summary

This week was the worst week yet for the pandemic in the U.S. with record cases, hospitalizations and deaths. Record cases and new restrictions are causing an uptick in the jobless numbers.

Job losses soar: Rising COVID-19 cases this fall are leading to further job losses. Traditional continuing claims increased by 230,000 Americans to 5.8 million people. In the latest data, 19 million people remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond six months. Initial claims increased by 137,000 people to 853,000, which was the highest level since mid-September.

Consumers less confident: Consumer sentiment lost additional ground last week, according to the most recent data. The initial December reading on Consumer Sentiment from the University of Michigan increased 5.9% to 81.4 from 76.9 in November. With the increase, the Michigan Sentiment Index is down 19.4% from February. The underlying gauges of current conditions and future expectations both improved, presumably from optimism about vaccines.

Consumers saw buying conditions for vehicles decline to tie October for the worst month since April. By contrast, the buying conditions for houses improved slightly. The Michigan survey data behind this initial December reading were collected the last week of November through the first nine days of December.

The daily measure of consumer sentiment from Morning Consult has not shown improvement thus far in December. That index as of Friday, Dec. 11, shows that sentiment is down 0.4% so far this month, leaving the index down by 23.2% compared to the end of February.

Consumer credit climbs: Consumer credit continues to grow. Auto loan performance saw modest deterioration in November, but performance remains better than last year and better than a normal year. Auto credit has loosened in each of the last three months with strong vehicle values and continued above normal loan performance, but credit is tighter than February and a year ago.

The Federal Reserve reported that Consumer Credit excluding housing-related debt increased in October by $7.2 billion. Revolving credit (credit card balances) declined by $5.5 billion; non-revolving debt (auto loans and student loans) increased by $12.7 billion.

Loan delinquencies and defaults have been low because of stimulus support and loan accommodations. Equifax estimates that 3.1% of auto loans were under an accommodation as of November 30, which was down from 3.3% on November 3 but is 2.4 percentage points higher than February. That 2.6% represents more than 1.9 million auto loans that likely would have fallen into delinquency and possibly complete default by now. In November, 1.31% of auto loans were severely delinquent, which was an increase from 1.28% in October. Of subprime loans, 4.72% were severely delinquent, which was an increase from 4.64%. Sixty-day delinquencies have increased in each of the last four months.

Cox Automotive’s newly launched Dealertrack Credit Availability Index measured loosening of credit in September, October, and November, but credit remains tighter than February and a year ago.

Used sales slow: Used-vehicle sales lost momentum in November. Used-vehicle values declined as they typically do this time of year.

We initially estimate that used vehicle sales were down 10% from a year ago in November. The November used SAAR was 37.0 million, down from 39.7 million last November and down from October’s 38 million. The November used retail SAAR estimate was 19.6 million, down from 20.7 million last year and down from October’s 20.2 million.

CPO sales in November declined 21% from a year ago and 20% from October. CPO sales are down 8% for the year to date.

The Manheim Used Vehicle Value Index, which is seasonally adjusted, increased 0.07% from October to November. The increase brought the Index to 162.0, which was a 16.6% increase from a year ago. On a year-over-year basis, all major market segments saw seasonally adjusted increases in November, but luxury cars and pickups again outperformed the overall market. The non-seasonally adjusted monthly change was 1.2%, which was the same as the average from the last three years.

Inflation mostly in check: Inflation remains subdued, but some categories are seeing price increases. Both headline and core inflation increased in November after no change in October. Both the headline and core CPI, which excludes Food and Energy, increased 0.2% on a seasonally adjusted basis from October. The Core CPI was up 1.6% year over year, which was unchanged from October and still relatively low. The overall CPI was up 1.2% from a year ago, which was also unchanged.

Some categories of products and services saw price increases such as airline fares, apparel, TVs, pet products, sporting goods, computers and lodging away from home. Offsetting those increases were declines in other categories like gasoline, parking fees, financial services, and eye care.

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