COX AUTOMOTIVE – COVID-19 cases keep growing in the U.S., but the pace of increase is slowing as the peak in new cases occurred a week ago. Stay-at-home orders are working.

  • Record jobless claims: The related closures will lead to a substantial economic contraction in March and the second quarter. The damage to the economy is most clearly seen in the record decline in retail sales in March and in jobless claims. Approximately 22 million Americans have applied for unemployment compensation over the four weeks through April 10. April’s employment report will set a record for job losses and could see the unemployment rate rise to levels not seen since the Great Depression.
  • Retail sales hard hit: The lockdowns related to COVID-19 weighed heavily on retail sales in March, as sales fell 8.7% from February, which was a record decline. Auto, apparel, food service, furniture, electronics, department store goods, gasoline, and sporting goods all saw large declines. Food sales saw a large increase as households stocked up on groceries. Health and personal care as well as web sales increased. April will likely see similar results as the lockdowns remain in effect.
  • Vehicle sales slow decline: Consumer sentiment and employment will lead what happens with auto sales. Sentiment is down year over year but improved slightly last week. Cox Automotive’s daily estimates of retail vehicle sales showed that sales declines had continued to trend lower each day through the end of last week. We estimate new retail vehicle sales were down 57% year over year as of last Thursday. Used sales were down 51% year over year. Both are strong improvements over the previous week.
  • Wholesale used values fall: Wholesale used vehicle values are down nearly 12% as a result of the decline in sales. If the mid-month performance holds, the monthly decline will set a record. The prior decline record was November 2008. All major market segments saw seasonally adjusted price declines, but luxury cars and SUVs outperformed the overall market.
  • Loan delinquencies high: Auto loan delinquency rates remain high, especially for a month in the year when they are typically down and after falling in February and March, though rates fell less than normal in March. Auto loans that are severely delinquent by 60 days or more are up. Subprime accounts that are severely delinquent are up to the highest level since at least 2006. In March, 1.49% of auto loans were severely delinquent, the highest delinquency rate for the month of March since 2009.
  • Looking ahead: The rest of the year could see some recovery, but it will depend on how the pandemic plays out. Consumer sentiment has stabilized, stimulus payments were received by many Americans beginning last week, and vehicle shopping and buying are on an upward trend.

Originally posted on F&I and Showroom

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