- The U.S. government on Thursday is expected to report the economy grew at a 1.8% annual pace in the second quarter, according to economists polled by Reuters.
- Despite that, the Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, citing still elevated inflation as a rationale for what is now the highest U.S. central bank policy rate in 16 years.
- In the most recent economic projections from Fed, policymakers expect at least one more quarter-percentage-point increase would be needed by the end of this year even though we are closer to the Fed’s long-run target of 2% as evidenced by June’s inflation reading at 2.4%, close to 2018 levels.
The good news is with wage growth of 5.5% Year over Year, we see spending, especially for services remains robust. Add that to single-family housing activity is rebounding and our chances for a soft landing are increasingly likely.
New Car Outlook
- Both the new and used markets show only minor changes this week. However, it does seem that there is some weakening in the new market with the sales pace down 25K from two weeks ago and the price average Listing Price is $46,981, down $567 from two weeks ago.
Used Car Outlook:
- The Used Retail Days-to-Turn estimate is currently around 51 days down from last week’s 54 days but still 20 days higher than this time last year and getting vehicles ready for sale is a big determinant of that efficiency improvement.
Wholesale Outlook: Source
- The 3-year-old index dropped another 0.9% while lane efficiency increased for 3-year-old models with the car segment decreasing by -0.59 and the Truck segment by -0.50%. More opportunities to get good inventory from the auction but they do require more work and more priority in the service lane with transport already slowing down the process.
Fixed Ops Source
- Through the first quarter of 2023, a positive trend was more growth in the aftermarket “sweet spot” which are vehicles that 6- to 12-model-years-old still considered to be in good condition but have aged out of the general OEM manufacturer warranties for parts and services.
- Experian’s Automotive Market Trends Report found the sweet spot reached the largest volume size ever, coming in at 104.3 million this quarter. This marked a 4% growth from the same time last year.
- This data suggests the CPRO work will only grow over the next several years along with internal repair orders to get acquired vehicles to the front line faster. The relationship between the sales and service department has never been more important than it is now. I wrote an article this week around some of the top-performing dealers’ best practices to get sales and service departments performing together at optimal levels. I will pin it to the top.