Unit Auto Sales Rose for a Second Consecutive Month but Remain Weak
Sales of light vehicles totaled 13.3 million at an annual rate in July, up from a 13.0 million pace in June. The July result was a 2.6 percent increase from the prior month and the third increase in the last four months. It was the fourteenth consecutive month below the 16 to 18 million range, averaging just 13.6 million over that period (see first chart). Weak auto sales are largely a result of component shortages that have limited production, resulting in plunging inventory and surging prices.
Breaking down sales by origin of assembly, sales of domestic vehicles increased to 10.7 million units versus 10.7 million in June, a rise of 3.2 percent, while imports were unchanged at 2.65. Domestic sales had generally been in the 13 million to 14 million range in the period before the pandemic, averaging 13.3 million for the six years through December 2019. The domestic share came in at 80.1 percent in July versus 79.6 in June.
Within the domestic light-vehicles category, domestic car sales were 2.01 million in July versus 2.04 million in June, a drop of 1.5 percent. Domestic light truck sales were 8.68 million versus 8.32 million in the prior month, a gain of 4.4 percent. That puts the domestic light truck share of total domestic auto sales at 81.2 percent, continuing a long-term upward trend (see second chart).
Domestic assemblies fell in June, coming in at 10.01 million at a seasonally adjusted annual rate. That is down 1.7 percent from 10.19 million in May and below the 10.8 million average pace for the three years through December 2019 (see third chart).
Component shortages, especially of computer chips, continue to restrain production for most manufacturers, creating a scarcity for many models, leading to lower inventory and higher prices. Ward’s estimate of unit auto inventory came in at 114,300 in June, up from 102,600 in May but still near the all-time low (see fourth chart). Inventory may be stabilizing as the average over the last ten months was 109,930 and has not dropped below 100,000. The Bureau of Economic Analysis estimates the inventory-to-sales ratio rose to 0.555 in June, up from 0.526 in May and the highest level since August 2021 (see fourth chart).
The low inventory levels have pushed prices sharply higher over the last two years, with the average consumer expenditure for a car coming in at $34,802 in June, up 3.2 percent from May to a new record high (see fifth chart). The average consumer expenditure on a light truck rose to $50,170 from $49,647 in May, up 1.1 percent for the month and a new record high (see fifth chart).
As a share of disposable personal income per capita, average consumer expenditures on a car came in at 62.3 percent versus 60.8 in May and up sharply from 51.8 percent in December 2019. The average consumer expenditure on a light truck as a share of disposable personal income per capita was 89.8 percent versus 89.4 percent in May and 78.8 percent in December 2019 (see fifth chart).
Robert 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.
