The Automotive Advisor Team

Economic Update: Source

President Joe Biden grabbed a bullhorn on the picket line Tuesday and urged striking auto workers to “stick with it” in an unparalleled show of support for organized labor by a modern president. “No deal, no wheels!” workers chanted as Biden arrived at a General Motors parts distribution warehouse, one of several facilities that have been targeted in a widening strike now in its 12th day. “No pay, no parts!”

Despite that and other factors, the economy is doing better than expected. 

· GDP growth is almost 1% higher than the same time last year.

· Unemployment is stable at 1% higher than the same time last year.

· Buyer confidence is almost 10 points higher than the same time last year. 

· earnings growth is steady and by our ability 7.2%.

New Cars:

  1. Cox Automotive forecasts annual new-vehicle sales pace in September to finish near 15.5 million, up from last September’s 13.6 million pace and up from August’s 15.0 million level.
  2. Sales volume in September is expected to rise 13.3% from one year ago and reach 1.28 million units; volume is forecast to decline 4% from August due to one fewer selling days.
  3. Q3 new-vehicle sales are forecast to be up more than 15% year over year, fueled by big gains from Honda, Nissan and Tesla.

Used Cars:

Used vehicle sales stayed steady and grew in Q3 with dealers seeing a flattening in the last two weeks. The day supply is following the same trend as sales and down to some of the slowest levels this year.

Used-car sales were up 4.5% year-to-date at the end of last month and SAAR climbed year-over-year. Because prices and interest rates are elevated across the industry, many consumers have been relegated to the used-car market to purchase their next vehicle.

Used-car sales were up 4.5% year-to-date at the end of last month and SAAR climbed year-over-year. Because prices and interest rates are elevated across the industry, many consumers have been relegated to the used-car market to purchase their next vehicle.

 

Wholesale Market Trends: Source: Cox Automotive Data

 According to the United Auto Workers update posted on Wednesday, 18,600 union members are now on strike at 41 Big 3 manufacturing facilities in 21 states. The ramifications in the used-vehicle space, particularly the wholesale market, continue to evolve. Black Book reported Tuesday that wholesale prices dipped just 0.22% last week. MMR has been stabling the last few weeks even with the looming threat of a longer strike in a government shutdown. Dealers are not rushing to the wholesale lanes to fill up their lots cautious of a stronger sales softening. 

 

Acquisition Market Trends:

The wholesale and retail markets are playing booties in the sandbox but staying separated just shy of $3000. As market dynamics shift those gaps could narrow but for the meantime, it’s a steady manageable market per acquisition and retail. However, the strike continuing will impact Full-Size, Crossover, and Van which increased in value last week.

 

 

Summary:

The good news from Cox Automotive is all the standard forecast metrics are flat or up. Even the wholesale value is showing minimal disruption in 2023 which gives us the indication that we have a straightaway stretch to Sprint with a Longview out front.

Let’s finish with the government shutdown that is just ahead. Most know that a shutdown impacts non-essential services like Parks and Recreation the most. As far as our functioning government is concerned it might be less impactful than you think.

 

The Department of Homeland Security’s 2022 shutdown plan calls for keeping 227,000 of its 253,000 employees and the Department of Justice said in its 2021 contingency plan that 85% of its 116,000 employees are not impacted. Air travel would remain relatively unimpeded, but the Internal Revenue Service has furloughed up to 90% of its staff in the past even though IRS employees are considered essential under its current contingency plan. All military personnel would remain working, but roughly 429,000 civilian Pentagon employees would be furloughed.

Now the 2018-2019 partial shutdown cost the economy about $3 billion, equal to 0.02% of GDP, according to the Congressional Budget Office, but over the years I’ve come to not trust their numbers of course any shutdown will cost the economy in production.

 My thoughts are other than pure speculation that could hurt commerce by scaring consumers into spending less, a short shutdown should not impact true retail sales much at all. Most shutdowns last short periods as in days and at most a few weeks. The impact on workers is usually minimal and in concentrated geographical areas. Working together in solving problems is always the best option but for those who are concerned this is just one more piece of kindling on the Economic fire, I think we’ll be OK.