August 4, 2021 Reading Time: 2 minutes

Sales of light vehicles totaled 14.8 million at an annual rate in July, down from a 15.4 million pace in June. The July decline was the second consecutive month below the 16 to 18 million range and the slowest pace since the recovery from the lockdown-induced plunge in 2020 (see top of first chart). Unit sales plunged in March and April 2020 to 11.2 million and 8.6 million annual rates, respectively. The pace of sales in April 2020 was the lowest on record since this data series began in 1976 and follows a run of 72 months in the 16 to 18 million range from March 2014 through February 2020.

Breaking down sales by origin of assembly, sales of domestic vehicles fell to 11.0 million units versus 11.5 million in June, a drop of 4.8 percent, while imports fell to 3.76 million versus 3.85 million in June, a drop of 2.1 percent. The domestic share came in at 74.5 percent in July versus 75.0 in June (see bottom of first chart).

A computer chip shortage has disrupted production for many manufacturers, creating a scarcity for many models, leading to lower inventory and higher prices. Both factors may have contributed to the slower sales pace in July. The lack of chips is showing some signs of easing, but it may take some time for conditions to return to normal.

Ward’s estimate of unit auto inventory came in at 209,500 in June, the lowest on record (see second chart). The Bureau of Economic Analysis estimates the inventory-to-sales ratio has fallen to a record low 0.804 for June (see second chart).

The plunging inventory levels are helping push prices higher. The average consumer expenditure for a car was $29,587 in June while the average consumer expenditure on a light truck rose to $45,650 (see third chart). The June levels represent 12-month gains of 12.5 percent and 11.7 percent, respectively, with both at record highs.

As a share of disposable personal income per capita, average consumer expenditures on a car jumped to 54.6 percent versus just 41.4 percent in March 2021 while the average consumer expenditure on a light truck as a share of disposable personal income per capita jumped to 84.2 percent versus 64.3 percent as recently as March 2021 (see third chart).

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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