Smoke on Cars
Auto Market Weekly Summary: November 28
Monday November 28, 2022
- New home sales delivered a surprising increase in October.
- Fed remains concerned about little evidence of inflation moderating.
- Consumers’ views of vehicle buying conditions declined but are better than this summer
The release of new data was limited last week due to the Thanksgiving holiday. What news there was represented a mixed bag. New home sales were stronger than expected. Jobless claims increased. Consumer sentiment showed mixed views. The Fed released not surprising notes from its November meeting.
New Home Sales and Inventory Deliver Surprising Increases
New-home sales, based on contracts signed on newly constructed homes, delivered a surprising increase in October. New home sales at an annualized pace of 632,000 were up 7.5% from September but down 5.8% from a year ago. Compared with October 2019, new home sales were down 11.5%.
New home inventory increased 1.5% from September and was up 21.4% from a year ago. New-home supply increased to 10 months, which is 50% higher than normal. In October, 29% of the new homes sold were homes not yet started, while 42% were under construction, and 29% were completed units. Even with the increase in new home sales in October, total home sales were down 4.5% for the month and down 26.2% from a year ago because existing home sales declined 5.9%.
Jobless Claims Climb
Seasonally adjusted initial jobless claims increased by 17,000 to 240,000 for the week ending November 19. Non-seasonally adjusted claims increased by 48,000. Both measures have increased over the last four weeks, and the nonseasonal number is almost back to what it was in 2020 before the pandemic began.
The seasonally adjusted number is 43,000 higher than the pre-pandemic average. Continuing claims increased by 48,000 from the previous week, bringing the total up to 1.55 million as of the week ending November 12. That level of continuing claims was 212,000 lower than before the pandemic but the highest level in 36 weeks.
The broadest measure of continuing claims declined by 50,000 to 1.26 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is up 34,000 over the last four weeks and is 847,000 lower than the pre-pandemic level.
Fed still concerned about inflation: The Fed released the notes from its early November meeting, which reflected continued concern about a “very tight” labor market amidst little evidence of moderating inflation.
However, the committee acknowledged that significant tightening had occurred this year, leading to slowing in interest rate sensitive sectors. The notes revealed concerns about the lags from monetary policy changes, growing downside risks from global headwinds, and worries about financial market stability. The notes suggest that a smaller but still substantial 50 BPs rate increase is likely coming in December for the final rate increase of the year.
Consumer Sentiment Mixed as November Ends
The sentiment index from the University of Michigan ended the month better than the preliminary reading earlier in the month but still recorded a decline from October. The index declined 5%, driven primarily by the views of current conditions falling 10%, while the expectations index was down only 1%. Consumers’ views of buying conditions for vehicles declined modestly but remained better than earlier this summer.
The daily index of consumer sentiment from Morning Consult has reflected improving sentiment in November, which was up 2.9% for the month as of last Friday. Sentiment improved in November as mid-term elections passed and the price of gasoline fell to its lowest level since February. The national average price for unleaded was $3.57 per gallon last Friday, according to AAA.
Join us for the Cox Automotive Industry Insights and Forecast Call hosted by Chief Economist Jonathan Smoke and the Industry Insights team on Thursday, January 12, at 11 a.m. EST. During this 90-minute session, you will hear how the auto industry performed in 2022 and how the Cox Automotive team sees the industry progressing in the new year.
Jonathan Smoke is the chief economist at Cox Automotive.