Light Vehicle Sales Are We at a Turning Point?

Transcription

1 Light Vehicle Sales Are We at a Turning Point? Federal Reserve Bank of Chicago June 3, 2016 Paul Traub Senior Business Economist

2 Overview U.S. Economy (C + I + G + Nx) U.S. Consumer Ability and Willingness to Buy U.S. Auto Industry Changing long-run demand for personal mobility Contractionary determinates Expansionary determinates Summary and Questions 1

3 Main Economic Indicators Annual Comparison 2009, 2015 and 2016 March YTD GDP Annual Growth Rate -2.8% 2.4% 1.9% 1 PCE Core Inflation Yr. / Yr. 1.2% 1.3% 1.7% Unemployment Rate Annual Avg. 9.3% 5.3% 4.9% Participation Rate 65.4% 62.6% 62.9% Nonfarm Job Growth (Monthly Avg.) -298, , ,000 Initial Unemployment Claims 573, , , Year-over-year change - Q1 16 / Q1 15 Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics 2

4 U.S. Real GDP Billions Chained $2009, % Change Q/Q at SAAR $ Billions 17,000 16,500 16,000 15,500 15,000 Q4 07 $14,992 Q1 16 $16,505 Percent ,500 14,000 13,500 13,000 12,500 12,000 Q % '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 0.8% Source: U.S. Bureau of Economic Analysis 3

5 U.S. Real GDP Contribution to Percent Change, Q4, Q/Q at SAAR Percent nd Est st Est GDP Consumption Private Investment -0.2 Net Exports 0.2 Government Note: Private domestic investment includes: nonresidential -0.81, residential +0.56, and inventory change. Government Consumption and Investment includes: Federal and State and Local Net Exports includes: Exports and Imports Source: U.S. Bureau of Economic Analysis 4

6 Real Personal Consumption Expenditures Index, Q = 100 Index Q '07 '08 '09 '10 '11 '12 '13 '14 '15 Durables Nondurables Services Source: Author s calculations using data from the BEA 5

7 Real Personal Consumption Expenditures Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Durable Goods Nondurable Goods Services -1.3 Source: U.S. Bureau of Economic Analysis 6

8 U.S. Light Vehicle Sales S.A.A.R Millions of Units Millions Cash for Clunkers Aug Feb '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 SAAR Annual Average May YTD Source: Ward s Automotive and BEA 7

9 Real Gross Domestic Investment Billions Chained $2009, % Change Q/Q at SAAR $ Billions 3,000 2,750 2,500 2,250 Q1 16 $2,833.6 Percent ,000 1,750 1,500 1,250 1,000 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16-2.7% Source: U.S. Bureau of Economic Analysis 8

10 Private Fixed Investment Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Fixed Investment Nonresidential Residential Source: U.S. Bureau of Economic Analysis 9

11 New Orders and Industrial Production Index 2012 = 100 Percent Apr New Orders Industrial Production Note: New Orders Nondefense Capital Goods Excluding Aircraft. Source: U.S. Bureau of Economic Analysis & U.S. Bureau of Census 10

12 U.S. Housing Starts In Thousands of Units (SAAR) and Annual Average (000) s 2, , , ,000.0 Apr 16 1, '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Annual Average SAAR Note: The United States averaged 1.5 million housing starts per year 1990 to Source: U.S. Census Bureau 11

13 Government Consumption & Investment Billions of Chained $2009, Percent Change - Q/Q at SAAR Percent Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Total Federal Federal Nondefense State & Local Source: U.S. Bureau of Economic Analysis 12

14 Stronger U.S. Dollar Select Currencies Jan 3, 2014 to May 27, 2016, Index 2014 = 100 Index Canadian Dollar to U.S. Dollar Index Euro to U.S. Dollar Stronger U.S. Dollar Stronger U.S. Dollar Weaker U.S. Dollar Weaker U.S. Dollar J M M J S N J M M J S N J M M J M M J S N J M M J S N J M M Index Japanese Yen to U.S. Dollar Index Chinese Yuan to U.S. Dollar 125 Stronger U.S. Dollar Stronger U.S. Dollar Weaker U.S. Dollar Weaker U.S. Dollar J M M J S N J M M J S N J M M J M M J S N J M M J S N J M M Source: Board of Governors Federal Reserve System 13

15 Real Imports and Exports Billions Chained $2009, Index 2005 = 100 Index '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Net Exports Exports Imports Q $561.2 $1,000 $800 $600 $400 $200 $0 -$200 -$400 -$600 -$800 -$1,000 Source: U.S. Bureau of Economic Analysis 14

16 China PMI Manufacturing & Nonmanufacturing - SA, +50 Signifies Expansion Index May '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Manufacturing Nonmanufacturing Source: China Federation of Logistics & Purchasing and Haver Analytics 15

17 Global Outlook IMF Forecast for Growth (April 16 Database), % Chg. Yr./Yr. Percent Advanced Economies Emerging and Developing Economies World Source: IMF - World Economic Outlook 16

18 U.S. Real GDP Blue Chip Forecast Annual Percent Change Chained $2009 Percent Jan '16 Feb '16 Mar '16 Apr '16 May ' Source: April 2015 Blue Chip Economic Indicators 17

19 U.S. Consumer Ability and Willingness to Buy 18

20 Real Disposable Personal Income & Savings Rate Percent Change Year/Year and Percent of Personal Income Percent Dec % 6.8% Apr % 3.3% -6.0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Savings Rate Real DPI Source: U.S. Bureau of Economic Analysis 19

21 Personal Savings Rate As Percent of Personal Income Percent '30's '40's '50's '60's '70's '80's '90's '00's '10's Source: U.S. Bureau of Economic Analysis 20

22 Personal Consumption Expenditures Gasoline and Other Energy Related Products - % of DPI Dollars Q % Q % Equivalent to $200 billion in $2009 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Author s calculations using U.S. Bureau of Economic Analysis data. 21

23 Total Consumer Credit Revolving and Non-revolving Credit as % of DPI Percent Mar % % '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 Total Credit Total Less Government Held Student Loans Source: Federal Reserve Bank - Board of Governors June 3, 2016 Federal Reserve Bank of Chicago 22

24 Personal Interest Payments As a Percent of Disposable Personal Income Percent Apr % '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 Source: U.S. Bureau of Economic Analysis June 3, 2016 Federal Reserve Bank of Chicago 23

25 Yield Curve 10 Year 1 Year Treasuries Percent May bps '54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14 Source: Board of Governors Federal Reserve System 24

26 Inflation CPI All Items and Core, Percent Change Yr./Yr. - SA Percent '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 All Items Core Apr % 1.1% Data: Consumer Price Index for All Urban Consumers, All Items and All Items Less Food and Energy Source: U.S. Bureau of Labor Statistics 25

27 Personal Consumption Expenditures Gasoline and Other Energy Related Products - % of DPI Percent Q % Q % Equivalent to $200 billion in $2009 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Author s calculations using U.S. Bureau of Economic Analysis data. 26

28 Consumer Sentiment University of Michigan Index January May '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Thomson Reuters / University of Michigan June 3, 2016 Federal Reserve Bank of Chicago 27

29 Initial Unemployment Claims 4 Week Moving Average Thousands '82 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 ' Source: Author s calculations using U.S. Bureau of Economic Analysis data. 28

30 Stock Market S&P 500 and Dow Jones Indices, Index Jan, 2014 = 100 Index Week Ending May 27, , , '14 F M A M J J A S O N D '15 F M A M J J A S O N D '16 F M A M S&P 500 Dow Jones Source: St Louis Fed and S&P Dow Jones 29

31 Home Prices S&P Case-Shiller 20 City Composite Jan, 2010 = 100 Index Mar '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: St Louis Fed and S&P Case-Shiller 30

32 Household Net Worth Trillions of Dollars, Q1 00 to Q '00 '02 '04 '06 '08 '10 '12 '14 Home Equity Q2 07 $65.2 Total Decline Q3 07 Q1 09 -$12.6 Financial and Other Q4 15 $83.7 $18.5 Source: Federal Reserve Z.1 Statistical Release,Table B100, Households and Nonprofit Organizations 31

33 Auto Industry 32

34 U.S. Total Vehicles Actual and Trend Trend over Time - In Millions of Units Millions 20,000 17, , ,710 18,690 18,040 15,000 12,500 10,000 '80 '85 '90 '95 '00 '05 '10 '15 '20 Actual 1995 Trend 2000 Trend 2005 Trend 2010 Trend 33

35 Origin of New Vehicle Sales Determinates of Long-Run Vehicle Sales Trend More Vehicles per Household Household Formation 5% 20% Scrappage 75% Total 34

36 Vehicle Miles Traveled 12 Month Total Miles Traveled in Billions 4,000 3,500 3,000 2,500 2,000 1,500 1, '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 35

37 Length of Vehicle Ownership Average Months Owned Months Q Q1 '05 Q1 '06 Q1 '07 Q1 '08 Q1 '09 Q1 '10 Q1 '11 Q1 '12 Q1 '13 Q1 '14 Q1 '15 New Vehicles Combined Used Vehicles Note: Average age for passenger cars and light trucks increased to 11.5 years in Vehicles in operation (VIO) increased to 258 million up 2.1% between 2014 and Source: HIS Automotive : 36

38 Sales Weighted Vehicle Age 10 Year Sales Weighting Years '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 Actual Forecast Note: Since 1960 the average cycle has been 8 years with an average expansion of 5 years. Source: Author s calculations using Ward s Automotive and Blue Chip Forecast data. 37

39 New & Used Vehicle Prices Index 2007 = 100 Index Apr '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 New Used Data: New Vehicles and Used Cars and Trucks CPI. Source: Author s calculations using Bureau of Labor Statistics data.. 38

40 Light Vehicles Sales & Nonfarm Employee In Millions of Units S.A.A.R. Millions '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 SAAR SAAR Est. Note: Linear regression L.V. Sales to Nonfarm Employment and Trend Variable with R 2 of Source: Author s calculations using data from Ward s Automotive and BLS 39

41 Light Vehicles Sales per Nonfarm Employee L.V. SAAR / Nonfarm Employment Units '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 VPE 12 MMA Linear (VPE) Source: Author s calculations using data from Ward s Automotive and BLS 40

42 Labor Participation Rate Percent of Noninstitutionalized Civilian Population Percent Apr % 62.0 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: U.S. Department of Labor: Bureau of Labor Statistics, Bureau of Economic Analysis and the Federal Reserve 41

43 Civilian Labor Force Percent Change Yr./Yr. Percent '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 ' % Source: U.S. Department of Labor: Bureau of Labor Statistics, Bureau of Economic Analysis and the Federal Reserve 42

44 Light Vehicles Trend Using Nonfarm Employee In Millions of Units S.A.A.R. Nonfarm '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 SAAR SAAR Est. Source: Author s calculations using data from Ward s Automotive and BLS 43

45 U.S. Nonfarm Payrolls Monthly and Annual Average Job Change In Thousands Thousands Apr Monthly Actual Annual Average Source: U.S. Department of Labor: Bureau of Labor Statistics 44

46 U.S. Light Vehicle Industry Millions of Units Millions Trend ,385 Blue Chip Consensus Source: Ward s Automotive 45

47 U.S. Light Vehicle Pent-Up Demand Millions of Units Millions K '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 46

48 U.S. Light Vehicle Blue Chip Forecast Millions of Units Calendar Year Millions Jan '16 Feb '16 Mar '16 Apr '16 May ' Source: April 2015 Blue Chip Economic Indicators 47

49 U.S. Light Vehicle Incentives As Percent of Transaction Price - SA Percent May % '10 '11 '12 '13 '14 '15 '16 Source: Author s calculation using Ward s Automotive and J.D Power data. 48

50 Light Vehicle Transaction Price Annual Average & Percent Change Yr./Yr. Dollars $32,000 $30,000 $28,000 $26, May 16 $30,993 Percent $24,000 $22, '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 May YTD % Chg. Yr/Yr (Right) Transaction Price (Left) Source: Author s calculation using J.D Power data. 49

51 Finance Term Length of Loan in Months '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 May YTD Source: J.D Power data. 50

52 Average Financing at Finance Companies New Car Loan Parameters Index 2008 = 100, NSA Percent Q Index Actual $27, Mos. $ % 60.0 '08 '09 '10 '11 '12 '13 '14 '15 Maturity Rate Financed Payment Source: Author s calculations using Federal Reserve Board of Governors data 51

53 Auto Loan Rates Commercial Banks New Autos 48 and 60 Month Loans Quarterly, NSA Percent '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 48 Mos. 60 Mos. Prime Q % 4.11% 3.50% Source: Federal Reserve Board of Governors 52

54 Payment Risk Percent Change in Payment to Percent Chang in Loan Rate by Duration Percent Change in Loan Rate Percent Change in Payment by Duration 36 Months 48 Months 60 Months 72 Months 1% 1.5% 2.0% 2.4% 2.9% 2% 3.1% 4.0% 4.9% 5.8% 3% 4.6% 6.0% 7.4% 8.7% 4% 6.2% 8.1% 10.0% 11.7% 5% 7.8% 10.2% 12.5% 14.7% 53

55 Car & Light Truck Mix Percent of Light Vehicles Percent '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Car Share Light Truck Share Apr 16 YTD 58.6% 41.4% Source: Author s calculations using Ward s Automotive data. 54

56 New Home Construction and Pickup Trucks Index 2005 = 100 Index '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Construction Pickups Data: New Privately-Owned Housing Units Under Construction and Ward s Large Pickup truck sales. Source: Author s calculations using U.S. Bureau of the Census data. 55

57 Oil Price North Sea Brent Average Annual Price In Current Dollars Dollars $140.0 $120.0 $100.0 $104.2 $115.0 $97.5 $80.0 $60.0 $63.1 $55.6 $71.1 $79.1 $40.0 $20.0 $0.0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Source: International Energy Agency Reference Case Forecast 56

58 Gasoline All Grades Average Annual Price In Current Dollars Dollars $4.0 $3.5 $3.50 $3.76 $3.33 $3.0 $2.5 $2.67 $2.31 $2.63 $2.74 $2.0 $1.5 $1.0 $0.5 $0.0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Source: International Energy Agency Reference Case Forecast 57

59 Buying Conditions for Vehicles University of Michigan Index Apr '08 '10 '12 '14 '16 Source: Thomson Reuters / University of Michigan June 3, 2016 Federal Reserve Bank of Chicago 58

60 Reasons for Buying Conditions for Vehicles University of Michigan Good / Bad Reason: Why do you say so? Low Prices Prices Will Increase Low Interest Rates Rising Interest Rates Time's good Fuel Efficiency Prices High High Interst Rates Can't Afford Uncertain Future Gas Prices Poor Selection Note: May add to more than a 100 due to multiple mentions. Source: University of Michigan Survey of Consumers

61 Summary Despite the slow start in 2016, the U.S. Economic growth is to continue to expand at a moderate pace in 2016 and The U.S. consumer continues to experience improved financial conditions supported by low energy prices, improving real personal income and rebounding household net worth. Low interest rates and low prices are two of the factors making it a good time to buy a new vehicle. Demographic changes, increasing length of ownership, and slowing labor force growth are changing the determinates of long-run vehicle sales trend. 60

62 Summary Low interest rates and longer financing terms are helping to keep new vehicle payment affordable while offsetting rising vehicle prices. Low energy prices are helping SUV and Pickup truck sales pushing light truck share to new record highs. Light vehicle sales may have peaked in 2015 but are expected to stay in the 17.0 million range through Rising interest rate could be a risk to vehicle sales going forward by causing monthly payments to increase at a faster pace than overall inflation. But consumers continue to feel it is a good time to buy a vehicle. 61

63 Thank You!