- February new-vehicle sales rose from a year ago on robust fleet business.
- January’s pending home sales surprised to the upside but may be short-lived.
- Consumer sentiment is mixed; consumers feel better about the present than the future.
Pending home sales were a surprise to the upside in January. The strength in new and pending home sales may be short-lived, with mortgage rates moving substantially higher in February and the weather being less cooperative.
The light new-vehicle sales pace, or seasonally adjusted annual rate (SAAR), declined in February to 14.9 million. Still, the SAAR and sales volumes were up from a year ago with improving inventories and more sales into fleet. New-vehicle prices declined slightly, and incentives increased.
Measures of consumer confidence and sentiment were mixed in February. Confidence declined as future expectations dimmed, while measures of consumer sentiment improved as gas prices fell.
Jobless claims in February failed to show any signs of growing stress in the labor market.
New-Vehicle Sales Rise on Robust Fleet Sales
Total new-light-vehicle sales were up 8.7% in February from a year ago, with the same number of selling days as February 2022. By volume, new-vehicle sales were up 9.1% from January. The February SAAR was 14.9 million, which was an 8.5% increase from last year’s 13.7 million but down 6.2% from January’s upwardly revised 15.9 million.
The strength in February was supported by robust growth of sales into fleet. Combined sales into large rental, commercial and government fleets were up 48% from a year ago. [Read more about fleet in today’s Data Point.]
February’s Average Transaction Price Dips Slightly from January
Based on preliminary Kelley Blue Book data, the average transaction price (ATP) of a new vehicle in February exceeded the average MSRP for the twentieth month in a row. Still, the average price declined 1.3% and was up 5.2% from a year ago. The average MSRP fell 0.8% in February from January and was up 7.3% from last year.
The average incentive spend from manufacturers increased 6.3% to $1,474 in February, so incentives as a percentage of average transaction price increased to 3.0%, the highest level since March 2022. [Check back in the Newsroom on Thursday, March 9, for more details on ATP.]
January’s Pending Home Sales Surprised to the Upside but May Be Short-lived
Pending home sales increased 8.1% in January when a 1% increase had been expected. Like new home sales, pending home sales are based on new contracts, and both saw stronger gains in January, assisted by better-than-normal weather and lower mortgage rates.
Looking ahead to February numbers, they may be less favorable. Mortgage rates have since increased substantially, and the weather was not as benign.
Consumer sentiment is mixed, feeling better about the present than the future
The Conference Board Consumer Confidence Index® declined 2.9% in February, as views of present situation improved, but future expectations fell by 8.3%. Consumer confidence was down 2.6% year over year. Plans to purchase a vehicle in the next six months fell to the lowest level since November 2021.
The confidence index did not decline as much during the pandemic as the sentiment index from the University of Michigan, but that series has improved every month this year. The Michigan index increased 3.2% in February and was up 6.7% from a year ago. Consumers’ views of vehicle buying conditions declined modestly in February but remained much better than a year ago.
The daily index of consumer sentiment from Morning Consult measured improving sentiment in February following a slight decline in January. That index increased 3.2% in February as the price of gasoline declined. According to AAA, the national average price for unleaded gas fell 4.1% in February to $3.36 per gallon on February 28, down 7% from a year ago.
Jobless Claims Fall; Little Sign of Distress in the Labor Market
Seasonally adjusted initial jobless claims declined by 2,000 to 190,000 for the week ending February 25. Non-seasonally adjusted initial claims fell by 9,000.
Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, declined by 5,000 from the previous week, reducing the total to 1.66 million as of the week ending February 18. That level of continuing claims was 108,000 lower than before the pandemic.
The broadest measure of continuing claims declined by 20,000 to 1.96 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is up 69,000 over the last four weeks, is 144,000 lower than the pre-pandemic level but is close to the highest level in a year.
The labor market is not as strong as it was a year ago, but there is little evidence of major deterioration in the jobless claims data. Moreover, jobless claims remain at historically low levels relative to the job base.
Register today: Join us for the Q1 2023 Cox Automotive Industry Insights and Forecast Call hosted by Chief Economist Jonathan Smoke and the Industry Insights team on Monday, March 27, at 11 a.m. EST. During this 90-minute session, you will hear how the auto industry performed in the first quarter and how the Cox Automotive team sees the industry progressing this year.
Jonathan Smoke is the chief economist at Cox Automotive.