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Smoke on Cars

Auto Market Weekly Summary: July 24


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Article Highlights

  1. Inflation declines to its lowest level since March 2021.
  2. Used-vehicle sales improve, wholesale prices drop.
  3. Access to auto credit improved, but auto loan performance is mixed.

The initial retail sales report for June was mixed, with upward revisions to May but weaker-than-expected growth in June. Adjusted for inflation, retail sales were unchanged for the month.

Existing home sales declined more than expected in June. Supply continues to limit what is possible for sales.

Residential construction starts declined in June, reversing a surge in May. Permits declined more than expected. However, the decline in permits was driven by multifamily homes. Single-family home sales increased modestly.

The labor market is not as strong as it was a year ago, and initial jobless claims are increasing, but continuing claims remain low and do not represent significant stress in the labor market.

Retail Sales Report Mixed as Auto Sector Overperforms the Market

The initial retail sales report for June was mixed, with upward revisions to May but weaker-than-expected growth in June. The 0.2% increase was less than the 0.3% increase expected and a deceleration from the upwardly revised 0.5% increase in May.

The auto sector again outperformed the rest of the retail market as sales excluding motor vehicles and parts increased by 0.2%, while sales of motor vehicles and parts increased by 0.3%.

Category-level performance was again mixed in June, as half of the major categories were up, and half were down. Miscellaneous stores (+2.0%) and non-store (ecommerce) retailers (+1.9%) had the largest gains. Gas stations (-1.4%) and building material and garden equipment and supplies stores (-1.2%) had the largest declines.

Retail sales were up 1.5% from a year ago on a nominal basis, down from 2.0% in May. Compared to last year, a third of the major categories were down, with gas stations (-22.7%) and building materials (-3.2%) down the most. Motor vehicles and parts were up 5.3% from a year ago, while non-store retailers (+9.4%) was the category up the most. Adjusted for inflation using the Consumer Price Index, retail sales were unchanged for the month but were down 1.6% from a year ago.

Existing Home Sales Declined More Than Expected

As the downward streak continues, existing home sales declined more than expected in June. The existing home sales SAAR declined 3.3% to 4.16 million from 4.30 million in May. At the June rate, existing home sales were down 18.9% from a year ago.

Inventory was unchanged at 1,080,000 units, down 13.6% from a year ago but still the highest level in seven months. Inventory keeps moving quickly, as 76% of the homes sold in June were on the market for less than a month. The typical time on the market was 18 days, unchanged from May but up from 14 days in June last year. The month’s supply of homes for sale increased to 3.1 months from 3.0 months in May but is still less than half of what is considered normal.

The median sales price increased to $410,200, down 0.9% from a year ago. The housing market remains very sensitive to mortgage rates, which have been volatile this year but higher in recent weeks. The existing home market is very constrained by supply and will be as long as rates remain high since existing mortgages are much lower than what is possible now. The limited existing home market creates opportunity in the new single-family home market, which is seeing stabilizing construction trends.

Construction Starts Decline After May Surge

Residential construction starts declined in June after a surge in May, and permits also declined more than expected. Total starts were down 8.1% year over year, but up 16.8% compared to June 2019. Permits were down 15.3% year over year in total, down 2.7% in single-family and 31.2% in multifamily. Permits were up by 9.1% compared to 2019 in single-family and up by 13.6% in multifamily.

Permits lead starts, so the permitting pace at 1.440 million units was slightly ahead of the 1.434 million starts pace, which indicates that starts will likely be little changed but more positive in future months.

Initial Jobless Claims Declined but Remain Higher Than in 2020

Seasonally adjusted initial jobless claims declined by 9,000 for the week ending July 15 from the previous period. However, initial jobless claims were still 14,000 higher than what we saw in 2020 before the pandemic began.

Non-seasonally adjusted initial claims declined by 300 from the previous period but were 13,000 higher than before the pandemic.

Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, increased by 33,000 from the previous week, moving the total to 1.75 million as of July 8. That level of continuing claims was 133,000 lower than before the pandemic.

The broadest measure of continuing claims declined by 16,000 to 1.75 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is up 73,000 over the last four weeks but is 355,000 lower than the pre-pandemic level.

The labor market is not as strong as it was a year ago, and claims have been increasing, but continuing claims remain low and do not represent significant stress in the labor market.

Jonathan Smoke
Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.

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