US: Motor Vehicle Sales

Mon Aug 03 07:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Total Vehicle Sales 17.2M 17.0M to 17.5M 17.6M 17.2M
Domestic Vehicle Sales 13.6M 13.3M to 13.7M 14.2M 13.6M

In a welcome sign of consumer strength, vehicle sales proved stronger than expected in July, up 3.2 percent from June to a 17.6 million annual rate that just exceeds Econoday's high-end forecast for 17.5 million. The gain is centered in North American-made vehicles where the rate rose 5.2 percent to 14.2 million that well exceeds Econoday's high forecast for 13.7 million. Sales of foreign-made vehicles, pulled down by a dip in car sales, fell 2.9 percent to a 3.4 million rate.

The results in sum are very good and point to a rebound for the motor vehicle component of the monthly retail sales report which fell in June due to a very tough comparison against an exceptionally strong month of May. Today's results are the first hard data out of the month of July and may be a good omen for subsequent July data, perhaps even Friday's employment report.

Market Consensus Before Announcement
Motor vehicle sales have been one of the most important indicators so far this year, falling at the start of the year before coming on strongly in the spring including a great spike in May to 17.8 million units. May proved too hard of a comparison for June but forecasters see July coming in at June's very respectable rate of 17.2 million.

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.