US: Motor Vehicle Sales

Tue Jun 02 07:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Total Vehicle Sales 17.0M 16.7M to 17.4M 17.8M 16.5M
Domestic Vehicle Sales 13.6M 13.4M to 13.9M 14.2M 13.2M

Consumers weren't holding back in May when it came to buying cars and trucks which sold at a 17.8 million annual rate for a whopping 7.9 percent gain from April. The rate is above the top-end of the Econoday forecast and the strongest since July 2005. The monthly percentage change is the strongest since March 2010. Incentives and low rates no doubt boosted sales but May's surge hints at pent-up demand, demand that has built up over the last six months when sales declined four times.

Among details, sales of North American-made vehicles rose 7.6 percent to a 14.2 million rate in a jump that points to a rise in future auto production and a rising auto contribution in the factory sector. Foreign-made vehicles sold at a 3.6 million rate for 9.1 percent gain which is among the largest monthly gains on record for this reading.

The April retail sales report proved to be a flop, but May's vehicle sales data point to a big surge for the motor vehicle component which makes up nearly 1/4 of total retail sales.

Market Consensus Before Announcement
Motor vehicle sales have been steady but not accelerating, but acceleration is what forecasters see for May, to a 17.0 million annual rate vs a below trend 16.5 million pace in April. Vehicle sales offer the very first hard data on any month's consumer spending.

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.