US: Motor Vehicle Sales

Tue Sep 01 07:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Total Vehicle Sales 17.3M 16.8M to 17.7M 17.8M 17.6M
Domestic Vehicle Sales 13.9M 13.7M to 14.1M 14.1M 14.2M

The auto sector helped lead the economy in May through July and extended the string to August. Motor vehicle sales rose a strong 1.5 percent to a 17.8 million annual rate in August from what was a very strong July at 17.6 million. The gain, however, was narrow and was not in North American-made but foreign-made vehicles where sales jumped 9.6 percent to a 3.7 million annual rate. Strength in imports was centered in light trucks which rose a very sharp 13.2 percent to a 1.5 million rate. North-American made vehicles slipped 0.4 percent to a 14.1 million rate.

The lack of strength on the domestic side will limit strength in the vehicle components of factory of data which, however, were very strong in June and July. The overall gain points to a strong retail sales report for August. Auto sales are a popular topic and will likely be cited by the hawks as another factor supporting liftoff at the September 17 FOMC.

Market Consensus Before Announcement
Motor vehicle sales are expected to remain very strong but ease back slightly, to a 17.3 million annual unit rate from 17.6 million in July. Motor vehicles, both sales and production, turned out to be the economy's big highlight of June and July. This will be the first hard data on August's consumer sector and a stronger-than-expected reading could revive talk of a September rate hike.

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.