Highlights. With about 3/4 of October’s results in, vehicle sales are running surprisingly close to September’s 12-year high. Sales of light trucks are doing slightly better than sales of autos, though both are down slightly. Yet levels are very high and suggest that hurricane-replacement demand may still be playing out in the auto sector. Yes, the month-to-month comparison may pull down October retail sales slightly, but the data otherwise point to a strong fourth-quarter start for the U.S. consumer.
Market Consensus Before Announcement
Hurricane replacement made for an unusual spike in September unit vehicle sales, to an 18.6 million annualized rate and a 12-year high. Forecasters see a sharp fall off for October though the consensus forecast of 17.5 million is still healthy. Sales of domestic-made vehicles are seen coming in at 13.6 million vs September’s 14.7 million.
Definition
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.
Description
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.