Auto Market Weekly Summary

Highlights

• Retail sales accelerated in March, but category performance was mixed as the auto sector saw declines along with several other categories.
• New construction retreated in March, with total starts down 4.3% year over year. Single-family starts were higher, while multifamily starts were down.
• Existing home sales declined in March, reversing much of the jump in sales in February. Meanwhile, the existing home supply remains very tight but is still up year over year.
• Jobless claims remain limited and reflect limited stress in the labor market.

The initial retail sales report for March showed a stronger-than-expected acceleration in consumer spending. The 0.7% increase was well above the expected 0.4% growth, and February’s sales increase was revised higher. Retail sales were up 4.0% year over year on a nominal basis in the initial March reading, and was up from an upwardly revised 2.1% increase year over year in February.

The auto sector underperformed the rest of the retail market as sales excluding motor vehicles and parts increased 1.1% while sales of motor vehicles and parts declined 0.7%.

Performance was mixed as four of the 12 major categories saw sales declines, but two categories had greater than 2% growth. Nonstore retailers (e-commerce) (2.7%) and miscellaneous stores (2.1%) had the largest gains. Sporting goods, hobby, book, and music stores (-1.8%) and clothing and clothing accessories stores (-1.6%) had the largest monthly declines.

Compared to last year, a third of the 12 major categories were down, with sporting goods, hobby, book, and music stores (-3.9%) and furniture, electronics, and appliance stores (-3.9%) down the most. Motor vehicles and parts were up 2.8% year over year, while nonstore retailers (e-commerce) (+11.3%) was the category up the most. Adjusted for inflation using the CPI, retail sales increased 0.3% for the month and were up 0.5% year over year.

Residential Construction Activity Weaker Than Expected in March

Residential construction activity retreated in March and was weaker than expected. Permits declined 4.3% when a 0.9% decline had been expected, but the prior increase was revised higher. Permits were up 1.5% year over year in total with mixed results – single-family permits were higher by 17%, while multifamily permits were down 20%. The monthly permit trend saw a larger decline in single-family, as single-family declined 5.7% and multifamily declined 1.2%.

Permits lead starts, so the permitting pace at 1.458 million units was ahead of the 1.321 million starts pace, which indicates that starts should increase in future months. The seasonally adjusted annualized rate of starts declined 14.7% when a 2.4% decline was expected, but February’s increase was revised higher. The decline in starts was in both single family and multifamily. After the March decline, total starts were down 4.3% year over year, but single-family starts were up 21% year over year, while multifamily starts were down 44%. Multifamily homes have more potential for starts in the months ahead as the permit pace was 485,000 compared to 299,000 for starts, while single-family had more starts than permits.

Existing home sales declined in March, reversing much of the jump in sales in February. The existing home sales seasonally adjusted annual rate (SAAR) fell 4.3% to 4.19 million from 4.38 million in February. At the March rate, existing home sales were down 3.7% from a year ago. Sales were down for the month in all regions except the Northeast, where sales increased 4.2%. The West region saw the largest monthly sales decline at 8.2%. All regions had sales down year over year.

Inventory increased 4.7% to 1.11 million units, which was up 14.4% year over year. Inventory is moving relatively quickly, as the typical time on the market was 33 days, which was down from 38 days in February but up from 29 days in March last year. The months’ supply of homes for sale increased to 3.2, which is less than half of what is considered normal but up from 2.7 months last year and to the highest supply level since November. The median sales price increased to $393,500, which was up 4.8% year over year.

Labor Market Less Robust Than a Year Ago, But Stress Remains Limited

The labor market is not as strong as it was a year ago, and new claims are sticking longer, but stress remains limited. Seasonally adjusted initial jobless claims were unchanged at 212,000 for the week ending April 13. That was 1,100 more than we saw in 2020 before the pandemic began. Non-seasonally adjusted initial claims declined by 6,800 and were 37,000 lower than before the pandemic.

Continuing claims, representing people who previously filed and remain on traditional unemployment compensation, increased by 2,000 week over week, moving the total to 1.81 million as of April 6. That level of continuing claims was 52,000 more than before the pandemic. The broadest measure of continuing claims declined by 12,500 to 1.95 million in the latest data, which lags the traditional number and is not seasonally adjusted. That total measure is down 154,000 over the last four weeks and is 150,000 lower than the pre-pandemic level.

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.