US: Motor Vehicle Sales

Thu Oct 01 07:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Total Vehicle Sales 17.5M 17.0M to 18.1M 18.2M 17.8M
Domestic Vehicle Sales 13.8M 13.5M to 14.2M 14.7M 14.1M

Consumer confidence readings have not been lying, at least based on September vehicle sales which surged 2.3 percent to an 18.2 million rate that exceeds the top Econoday forecast and is the strongest since July 2005. The gain is centered in North American-made vehicles where sales rose 4.3 percent to a 14.7 million rate which is the highest also since July 2005. Sales of foreign-made vehicles, pulled down in part by a 17 percent month-to-month decline for Volkswagen, fell 5.4 percent to an annual rate of 3.5 million. Foreign-made aside, today's report points to strength for the motor vehicle component of the monthly retail sales report and underscores the two-way economy: domestic-based which is rising and foreign-exposed which is declining.

Market Consensus Before Announcement
Motor vehicle sales have been perhaps the standout indicator so far this year, showing very strong gains that lifted household spending during the summer. Sales in September are expected to ease back to a 17.5 million annual rate from 17.8 million in August. Such a decline would lower expectations for September retail sales but would still point to a healthy consumer.

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.