US: Motor Vehicle Sales

Fri May 01 07:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Total Vehicle Sales 16.9M 16.7M to 17.1M 16.5M 17.2M
Domestic Vehicle Sales 13.3M 13.2M to 16.8M 13.2M 13.7M

The early indications from April have mostly been weak including the first hard consumer data on the month which are vehicle sales. Vehicle sales fell 4.1 percent to a 16.5 million annual rate. This is a very solid rate but the comparison with March points unfortunately to a downtick for the motor vehicle component of the retail sales report. This is a key component of the report which has been bouncing up and down in recent months, unable to find traction as have retail sales in general.

Market Consensus Before Announcement
Sales of total light motor vehicles popped up strongly in March, up 6.2 percent to an annual rate of 17.2 million units. This is the strongest rate since November and points to a badly needed gain for the motor vehicle component of the monthly retail sales report which has declined in 2 of the last 3 reports and was down very sharply in February. The gain is evenly distributed between North American-made vehicles and foreign-made vehicles and between cars and light trucks. Today's data are the first hard sales data for the month of March and suggest that consumers, enjoying a strong jobs market, may finally be spending more.

Unit sales of motor vehicles include domestic sales and foreign sales, otherwise referred to as imports. Domestics are sales of autos produced in the U.S., Canada, and Mexico. Imports are U.S. sales of vehicles produced elsewhere. These are for light vehicles which include all passenger cars and light trucks up to 14,000 pounds gross weight (including minivans and sport utility vehicles). Individual manufacturers usually report sales on the first business day of the month. One of the first tabulators of the data is Autodata Corporation. Motor vehicle sales are good indicators of trends in consumer spending and often are considered a leading indicator at business cycle turning points. One should note that manufacturers do not break out vehicle sales to businesses, which are a smaller but still significant percentage of the monthly total.

Since motor vehicle sales are an important element of consumer spending, market players watch this closely to get a handle on the direction of the economy. The pattern of consumption spending is one of the foremost influences on stock and bond markets. Strong economic growth translates to healthy corporate profits and higher stock prices. The bond market focus is on whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s.

Retail sales growth did slow down in tandem with the equity market in 2000 and with the 2001 recession. A low interest rate environment through 2006 supported motor vehicle sales. But the credit crunch and recession led to a sharp drop in sales in 2008.

In a more specific sense, auto and truck sales show market conditions for auto makers and the slew of auto-related companies. These figures can influence particular stock prices and provide insight to investment opportunities in this industry. Given that most consumers borrow money to buy cars or trucks, sales also reflect confidence in current and future economic conditions.