Through the first two weeks of 2023, the economy and automobile market are showing mixed trends.
Consumer spending remains high, especially on vehicles. But sales are lagging due to high interest rates and prices.
“We’ve also seen auto loan rates move even higher so far this year and that corresponds to retail vehicle sales so far in January being off last year’s pace.”Jonathan Smoke, Cox Automotive Chief Economist
“Consumer sentiment is up slightly and that’s even with gas prices up slightly,” said Cox Automotive Chief Economist Jonathan Smoke. “We’ve also seen auto loan rates move even higher so far this year and that corresponds to retail vehicle sales so far in January being off last year’s pace. But that’s principally being driven by softness in the new vehicle market. But both new and used has tighter supply relative to what we saw in December.”
Dealertrack data showed new retail sales were down 21 percent year over year. Used sales were down only 1 percent. The volume was up 7 percent for used vehicles.
Rates continued to climb. For new vehicles, rates are at an average 8.3 percent. For used vehicles, the rate rose to 12.8 percent.
Smoke said he’s not drawing any long-range conclusions from the data, due to January typically being a light sales month, other than the affordability crisis continues.
“The market’s biggest problem is affordability driven by the high level of interest rates,” Smoke said.
Consumer sentiment increase 1.5 percent, according to Morning Consult, in the past week. Sentiment increased 2.6 percent in November and 4.3 percent in December. It is down 4.6 percent from last year.
“The consumer closed out 2022, continuing to spend.”Jonathan Smoke, Cox Automotive Chief Economist
“Consumer spending on credit and debit cards was up 28 percent year over year, according to Verisk. Spending has moved to services and travel away from goods, spending on vehicles was up a robust 34 percent year over year in the latest week of data,” Smoke said. “The consumer closed out 2022, continuing to spend.”
Unemployment throughout much of the country remains historically low, with 1.6 million on traditional benefits. That was 63,000 lower than before the pandemic.
“The share of people on unemployment benefits remains low, but it has been steadily increasing. We also see more stress in some areas of the country as states like New Jersey, Alaska, Minnesota, California and Montana sees higher shares.”