Auto Market Weekly Summary

Daily new COVID-19 cases continue an upward trend with the increases occurring mainly in areas that previously did not have large outbreaks. However, the President and First Lady have tested positive for the virus, which raises attention to the pandemic and raises uncertainty about the election, which is less than a month away.

Consumer spending slows: Consumer spending growth slowed in August as incomes fell. Monthly growth in consumer spending slowed in August too as spending on non-durable goods fell and spending on durable goods slowed substantially. The reason for the decline was that personal income declined 2.7%, as government payments declined 15%. Unemployment benefit payments declined 52% while “Other” government payments declined 2.9%. The personal savings rate declined to 14%, which was the lowest savings rate since March.

Jobs recovery slows: The jobs recovery slowed in September. Jobs were added, and unemployment declined again. The weekly jobless claims data get more complicated to analyze going forward as many have started to fall out of the continued claims having reached a maximum of 6-months of coverage from the start of the pandemic.

The broadest measure of continuing claims, which includes coverage as part of the pandemic assistance provided by the CARES Act, has 26.5 million still on unemployment benefits. Initial claims for the week ending September 26 declined modestly to 837,000. While that number was the lowest level of initial claims in this recession, weekly initial claims never eclipsed 665,000 during the Great Recession.

More of the remaining job losses are now recognized as permanent. New job losses remain at a troublingly high level.

Consumer sentiment improves: Despite the rise in COVID-19 cases and persistently high weekly job losses, consumer sentiment continues to see modest improvement.

Consumer Confidence, according to the Conference Board, jumped 18% in September and left confidence down 19% year over year. Plans to purchase a vehicle in the next six months improved in September but remain down year-over-year and from February. Plans to purchase a home also improved and remain up from a year ago.

The Morning Consult Index of Consumer Sentiment saw a ninth week of improvement last week leaving sentiment down 19.1% since February 29. Likewise, the final reading from the University of Michigan had consumer sentiment increasing in September leaving sentiment down 20% since February. The jump in the consumer confidence index has that reading now more in alignment with Morning Consult and other measures when compared to February or a year ago.

Vehicle sales strong: New vehicle deliveries were strong in September, with a SAAR of 16.3 million, exceeding all forecasts. However, retail sales do not appear to be as strong as the deliveries suggest. The industry can afford to see inventories build from multi-year lows. 

September’s total new vehicle deliveries were up 6.1% from a year ago with two more selling days compared to September 2019. With those volumes, the September SAAR was 16.3 million, a 5% decrease from last year’s 17.1 million but an improvement from August’s 15.2 million.

Combined sales into large rental, commercial, and government buyers were down 34% year-over-year in September. Sales to commercial fleets performed best and were down only 6% from a year ago. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail deliveries were up 13% from a year ago in September, leading to an estimated retail SAAR of 14.5 million, up from 14.2 million last September and up from August’s 13.8 million rate.

We estimate that fleet sales are down 41% in 2020 through September, while retail deliveries are down 14%. The overall new-vehicle market is down 19% so far this year. The word “deliveries” is being used intentionally, as our indicators suggest true retail sales were strong in September but not up year over year.

We will have more complete insights into what happened with vehicle sales and supply in September when we have more data next week.

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