Auto Market Weekly Summary

The downward trend in new daily COVID-19 cases continues, but winter weather impacted economic activity and vehicle sales over the past two weeks though housing strengthened.

Retail sales rise: Retail sales jumped in January, supported by the $600 stimulus checks issued early in the month in the $900 billion stimulus package signed into law at the end of December. Retail sales increased 5.3% in January, but the December decline was revised to be worse than originally estimated.

Auto sales underperformed against other goods as sales, excluding motor vehicles and parts, increased 5.9%. Motor vehicles and parts were up 3.1%. Most categories saw gains, and the biggest gainers were department stores, electronics and appliance stores and furniture and home furnishing stores. With the increase in January, retail sales are up 7.4% from a year ago. Categories with the largest declines in January compared with a year ago were food service and drinking places as well as clothing and clothing accessory stores.

Housing strengthens: Housing has started the year with strength. New construction starts were impacted by weather in January, but permits were up. Beneath the totals remains a split in the composition of new construction. Single family permits are up 30%, while multi-family permits are up 10%. Multifamily permits are more volatile but did see a notable 27% increase in January from December.

Existing home sales saw another gain in the SAAR in January, while inventory slipped to yet another all-time low. The pace of existing home sales is now up 23.7% from a year ago and is at the second highest level since November 2005 (October was higher).

The months’ supply of homes for sale remained at 1.9 months, which was a new record low set in December and less than a third of what is considered normal.

Used-vehicle market gains: In the used-vehicle market, retail sales gained momentum in January, though momentum declined last week as harsh winter weather took a toll. Market conditions suggest we will at least see a similar performance in February as in January if the weather allows. Wholesale vehicle price increases are accelerating. The seasonally adjusted Manheim Used Vehicle Value Index increased 3.3% comparing the first 15 days of February to the month of January. The non-seasonally adjusted monthly change was +2.8%. Retail prices have yet to follow the wholesale trend, but that may change soon.

Consumer sentiment rises: Consumer sentiment has seen improvement so far in February but lost a little ground over the last seven days ended Feb. 19. Since January 31, the daily index is up 2.2% as of last Friday, but it was down 0.2% for the week as a result of declines last weekend that have not yet been offset by meager gains so far this week. The index is down by 0.7% compared to the end of October and down by 19.2% compared to the end of February.

Jobless claims increase: New initial jobless claims have been increasing in February based on the latest data including revisions to prior weeks. The claims activity reflects still high levels of pandemic activity in many areas of the country preventing service sector businesses from hiring. Traditional continuing claims declined by 64,000 to 4.5 million as of February 6. In the latest data, 18.3 million Americans remain on some form of unemployment benefits including pandemic unemployment assistance, which provides coverage beyond six months. Initial claims as of February 19 increased by 13,000 to 861,000, which is the highest level since January 16. At this level, claims are much higher than we had been seeing in the fall, affirming that COVID continues to impact activity and employment.

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