Light vehicle sales totaled 13.3 million in March, down from 14.0 million in February. The March result was down 4.6 percent from the previous month and was the tenth consecutive month down the 16 to 18 million range, averaging just 13.6 million (see first chart). Poor auto sales are mainly due to material shortages which limit production, resulting in reduced inventory and rising prices.
Domestic vehicle sales fell to 10.4 million units, down 4.0 percent from 10.8 million in February, while imports fell to 2.93 million from 3.13 million in February, down 6.5 percent, according to assembly sources. Domestic sales typically ranged from 13 million to 14 million in the pre-epidemic period, averaging 13.3 million for six years from December 2019. Domestic shares rose 78.0 percent in March vs. 77.6 percent in February. For the third month in a row in February, domestic gatherings declined, reaching a seasonally consistent annual rate of 8.15 million. Which is 7.0 percent lower than the 8.77 million in January and much lower than the 11.2 million average for six years from December 2019 (see first chart).
Lack of components, especially computer chips, limits production for most manufacturers, creating a shortage for many models, resulting in lower inventory and higher prices. Ward’s unit auto inventory estimates came in at 107,400 in February, up from 106,200 in January but still the lowest ever (see second chart). Inventory could be stable as the average was 109,533 in the last six months and did not fall below 100,000. The Bureau of Economic Analysis estimates that the inventory-to-sales ratio fell to 0.373 in February, a new record low (see second chart).
Submerged inventory levels have pushed prices sharply higher over the past two years. However, prices could stabilize with the average consumer spending on cars coming in at 32 32,552 in February, down 1.6 percent from January, the second consecutive monthly fall and the third in the last four months. The average consumer spending on a light truck dropped from $ 48,665 to $ 48,095 in January, the second and third consecutive fall in the last four months (see chart 3). Still, the February levels represent a 12-month gain of 18.0 percent and 12.7 percent, respectively.
As part of disposable personal income per capita, average consumer spending on a car rose to 59.0 percent from 60.2 percent in January, but increased sharply from 41.6 percent in March 2021. The average consumer spending per capita on a light truck as part of disposable personal income was 87.2 percent vs. 88.5 percent in January but 64.5 percent in March 2021 (see Chart 3). Both systems are still below their all-time highs.
Robert Hughes
Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob was previously head of Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.