Cox: New Car Sales Rise, Used Fall in May

Like death, a recession is sure to come. In the meantime, recent reports showed signs that the economy isn’t in a hurry.

The pattern continued with these three reports Thursday:

1. Cox Automotive forecast that new cars sold at a rate well above a year ago as inventories swell and demand refuses to abate.
2. The Labor Department reported a seasonally adjusted 229,000 new jobless claims in the week ending May 20. It was up 4,000 from April’s volume, but only after April was revised down by 17,000.
3. The U.S. Bureau of Economic Analysis revised its estimate for first quarter growth upwards to 1.3%. A month ago it estimated a 1.1% gain.

Credit unions depend on autos for about a third of their loans. Most of those loans are for used cars, where sales have been softening, but credit union share has been rising in the past year or so for new car loans.

Cox Automotive provided mixed trends for new and used vehicles this week.

Cox Automotive’s forecast Thursday showed seasonally adjusted annual rate of 14.9 million this month, up 20% from 12.6 million a year earlier and down from a surprisingly high 15.9 million in April.

Last year’s sales were constrained by low inventory. Dealers had 1.1 million vehicles on their lots a year ago. As of last week, they had 1.9 million units — a two-year high.

Cox Automotive Senior Economist Charlie Chesbrough said May’s gain for new car sales might seem surprising, given high interest rates and vehicle prices, than a year earlier.

“The reason? Vehicle shoppers now have a much better chance of finding something that fits their needs,” Chesbrough said. “Pent-up demand, held back by limited product availability last year, is now being fulfilled as inventory levels improve around the country.”

Despite the resilience, the news release said that Cox Automotive expects a slowdown in this year’s second half.

In Cox Automotive’s weekly market report Tuesday, Chief Economist Jonathan Smoke said a rolling 30-day average of sales from a same-store sample shows new car sales were up 26% and used car sales were down 7% last week compared with a year earlier.

“Momentum continues to favor the new market over the used market this spring, but now both are getting tighter,” Smoke said. Prices remained high, interest rates changed little and low-rate incentives became scarcer in May.

“It’s going to be interesting to see if that changes in the final big weekend of the month over the Memorial Day holiday.”

But Smoke said the bigger worry remains whether Congress can bypass the debt ceiling.

“If we were to see the U.S. default in early June that would likely push us into a recession,” he said. “At the very least, we’re going to see a negative impact on consumer confidence and that will likely negatively impact consumer spending.”