The Automotive Advisor Team

Automotive Market Update 5-31-2024: Consumer’s Concerns

Economic Source

Consumer sentiment fell back about 10% this May following three consecutive months of very little change. This 8.1 index-point decrease is statistically significant and brings sentiment to its lowest reading in about five months.

Year-ahead inflation expectations edged up from 3.2% last month to 3.3% this month, remaining above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations held steady at 3.0% for the second straight month.

Automotive Used Market Outlook:

The average age of vehicles in use on American roads has continued to trend upward at a pretty steady pace for the past 10 years or so. Since COVID-19 first hit and new-car sales began to fall, that figure has only risen more and continued on the same path. According to a new report by S&P Global Mobility, the combined average age of passenger cars and light trucks has now reached a record high of 12.6 years.

Cox Automotive’s Manheim Wholesales Market Source

Three-year-old wholesale depreciation was 0.4% this week and lane efficiency decreased some. Used retail sales still trending close to 2019 and new retail sales both dipped lower than 2019. Days’ supply moved down a little for both as we progressed through the month.

  • The 3-year-old index depreciated 0.4% to 98.7%. Non-luxury depreciated 0.5% and luxury depreciated 0.4%.
    • Wholesale values dropped for all model years.
    • Sale prices below MMR (-1.50%).
  • Three-year-old lane efficiency dropped back down to its typical seasonal level. Six-year-old lane efficiency still running higher than the previous two years.

Black Book: Source

  • The market continues to report “normalcy”, with the overall declines on-pace with pre-pandemic behavior.
  • However, the trends aren’t one size fits all, with the trends of auction inventory and conversion rates varying from lane to lane, depending on the seller’s strategy and offered inventory.
  • The Used Retail Days-to-Turn estimate is now sitting around 40 days.
  • Average auction sales rate this week was 55%, down –1% from previous week.

Retail Trending: Source

  • Retail prices declined 0.4% for non-luxury and 0.5% for luxury. Luxury spreads stabilizing and six-week lagged non-luxury spreads now increasing due to recent wholesale values declining at a higher rate than retail values.
  • The used retail sales rate is trending similar to most previous years; days’ supply dropped to 40 days.
  • New car sales trending slightly below 2019 levels and days’ supply dropped to 67 days.

Summary: Source

The housing market continues to face challenges with declining sales and increasing inventory, influenced by high mortgage rates. While durable goods orders have shown some monthly growth, the year-over-year decline and persistent issues in specific sectors like aircraft manufacturing suggest underlying weaknesses. The labor market remains relatively stable, though not as strong as before the pandemic, with initial and continuing claims providing crucial insights. Consumer sentiment indicates cautious optimism tempered by concerns over rising inflation and interest rates.