US: Motor Vehicle Sales

Tue Oct 03 07:00:00 CDT 2017

Consensus Consensus Range Actual Previous
Total Vehicle Sales 16.7M 15.0M to 17.5M 18.6M 16.1M
Domestic Vehicle Sales 12.6M 12.5M to 13.6M 14.7M 12.7M

In the strongest monthly sales performance in 12 years, unit vehicle sales shot up to a hurricane-fueled 18.6 million annualized rate in September vs a hurricane-depressed 16.1 million rate in August. September's rate points squarely at replacement demand following Hurricane Harvey's flooding of Houston just as the weak August rate pointed to the initial negative effects of the hurricane. Today's results point to a substantial surge for the motor vehicle component of the retail sales report and a major boost for what was a weak overall report in August. Sales of domestic-made vehicles rose to 14.7 from August's 12.7 million.

Market Consensus Before Announcement
Motor vehicle sales are coming off their worst showing in 3-1/2 years due to initial disruptions from Hurricane Harvey. The weakness in unit sales translated into weakness for dollar sales as tracked in the retail sales report where the vehicle component dropped sharply during August. Though Hurricane Irma's Florida hit is in play for September's numbers, forecasters see much better strength with the consensus for total unit vehicle sales at a 16.7 million annualized rate vs August's 16.1 million. Yet the low call for this reading, at 15.0 million, does reflect expectations for a major hurricane hit. Sales of domestic-made models are expected to come in at 12.6 million vs the prior month's 12.7 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.