Automotive Outlook Georgia State University Economic Forecasting Center Atlanta, GA August 23, 2017 William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago
Brief Macro Assessment
GDP expanded by 2.1% over the past year 8 6 4 2 0 2 4 6 8 10 Real gross domestic product percent Percent change from a year earlier Quarterly change (saar) 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The Federal Open Market Committee (FOMC) expects GDP to grow around trend over the next three years Real gross domestic product percent change from a year earlier 6 5 4 3 2 1 0 1 2 3 4 5 FOMC Central Tendency (June 2017) 2017 2.1 2.2 2018 1.8 2.2 2019 1.8 2.0 Longer run 1.8 2.0 FOMC 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Employment increased by over 2.1 million jobs over the past 12 months Total employment percent 6 4 2 0 2 4 6 8 Percent change from a year earlier Monthly change (saar) 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
The unemployment rate has fallen to 4.3% percent 11 10 9 8 7 6 5 4 3 Unemployment rate 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The FOMC forecasts that the unemployment rate will be just below the natural rate through 2019 10 9 Unemployment rate percent 11 FOMC Central Tendency (June 2017) 2017 4.2 4.3 2018 4.0 4.3 2019 4.1 4.4 8 Longer run 4.5 4.8 7 6 5 FOMC 4 3 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19
Inflation had been moving higher Personal consumption expenditure chain price index percent change from a year earlier 6 5 4 3 2 1 0 1 2 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
In large part inflation has been following the pattern of energy prices dollars per barrel, 2016 dollars 160 140 120 100 80 60 40 20 0 Real West Texas Intermediate oil price 1970 '75 '80 '85 '90 '95 '00 '05 '10 '15
Consumer spending on energy are well below the historical average Energy goods and services expenditures as a share of total consumption percent 10 9 8 7 6 60s 70s 80s 1960 2017 5 4 90s 00s 10s 3 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
The FOMC anticipates that PCE inflation will be around their two percent target in 2018 and 2019 Personal consumption expenditure chain price index percent change from a year earlier 6 5 FOMC Central Tendency (June 2017) 2017 1.6 1.7 2018 1.8 2.0 2019 2.0 2.1 4 Longer run 2.0 3 2 FOMC 1 0 1 2 1990 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18
Manufacturing output is starting to increase after being unchanged for over a year percent 40 30 20 10 0 10 20 30 40 Industrial production manufacturing Monthly change (saar) Percent change from a year earlier 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Capacity utilization has been improving Capacity utilization manufacturing percent 86 84 82 80 78 76 74 72 70 68 66 64 62 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Industrial production is forecast to improve but expand at a pace below its historical rate Total industrial production percent 10 5 Percent change from a year earlier 0 5 10 15 20 25 Quarterly change (saar) Q2 2017 Blue Chip IP Forecast Actual Forecast 2016 2017 2018 0.1 2.8 2.3 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Auto Outlook
Light vehicles sales set a record in 2016 edging up 0.4% from 2015 2017 year-to-date sales were 1.8% lower than a comparable period of year earlier Light vehicle sales millions of units (saar) 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Year-to-date light truck sales are 4.8% higher than a year earlier, while passenger car sales are 11.7% lower millions of units (saar) 13 12 11 10 9 8 7 6 5 4 3 Passenger car and light truck sales light trucks passenger cars 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Light truck market share set a record high in June percent 70 65 60 55 50 45 40 35 30 Light truck share of light vehicle market sales 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
What had been an passenger car market has increasingly become a light truck market Motor vehicle sales millions 16 14 12 Autos 10 8 6 4 Light trucks 2 0 1980 '85 '90 '95 '00 '05 '10 '15
Days supply of vehicles are somewhat higher than desired, especially for passenger cars days 120 110 100 90 80 70 60 50 40 30 Passenger car and light truck days supply light trucks passenger cars 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
The average age of the fleet has risen substantially Average age of lightvehicles years 12.0 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 1995 '00 '05 '10 '15
Motor vehicle registrations continue to rise Motor vehicle registrations millions 300 250 200 150 100 50 0 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
Registrations have been rising at a faster pace than the driving age population Motor vehicle registrations and drivingage population millions 300 250 200 150 100 50 0 Population 16+ Registrations 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
The number of vehicles per driving age adult has been relatively flat for the past 15 years Motor vehicle registrations per person 16 years and over 1.1 1.0 0.9 0.8 0.7 0.6 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
The driving age population is forecast to increase by over 80 million people over the next 45 years Motor vehicle registrations and drivingage population millions 350 300 250 200 150 100 50 0 Population 16+ Registrations 1960 '70 '80 '90 '00 '10 '20 '30 '40 '50 '60
Since 1980 light vehicle sales has averaged growth of 0.4% per year millions 22 20 18 16 14 12 10 8 Light vehicle sales 1980 '85 '90 '95 '00 '05 '10 '15
Domestic production has remained at a solid share percent 100 90 80 70 60 50 40 30 20 10 0 Share of light vehicle sales imports new domestics Detroit 3 1980 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 percent 100 90 80 70 60 50 40 30 20 10 0
Motor vehicle assemblies has averaged 10.5 million Motor vehicle assemblies millions 14 13 12 11 10 9 8 7 6 5 4 3 1975 '80 '85 '90 '95 '00 '05 '10 '15
Automotive production is lower than a year earlier percent change from a year earlier 125 100 75 50 25 0 25 50 75 Industrial output consumer autos and trucks 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Since the mid-1980s the number of auto assemblies has been slipping, while light trucks has been rising millions 10 9 8 7 6 5 4 3 2 1 0 Motor vehicle assemblies Autos Light Trucks 1975 '80 '85 '90 '95 '00 '05 '10 '15
New vehicle prices are falling Consumer price index new vehicles percent change from a year earlier 6 5 4 3 2 1 0 1 2 3 4 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
New vehicle prices have risen at a much smaller rate than overall prices in the economy Consumer Price Index Index: 1960=100 900 800 700 600 500 400 300 200 100 0 All Items New vehicles 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
What had been more than a year s worth of income to purchase a vehicle has fallen to less than 8 months Car expenditure as a share of per capita disposable income percent 110 100 90 80 70 60 50 1960 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
The automobile delinquency rate from direct loans are rising, but remain very low percent 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Delinquency rate automobile direct loans 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
The automobile delinquency rate from indirect loans have also been rising, but also remain low percent 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 Delinquency rate automobile indirect loans 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Alternative powered vehicles (including hybrids) are a very small fraction of total vehicle sales percent of total sales 100 90 80 70 60 50 40 30 20 10 0 Power Type Gasoline and Diesel Alternative 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Alternative powered vehicles (including hybrids) market share barely exceeded 4% and have been declining over the past two years Alternative Powered Vehicles percent of total sales 5 4 3 2 1 0 1990'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17
Economic indicators for the automotive industry are very positive Key Economic Indicators for the Automotive Industry From 1990 During the Since the end of the through 2007:Q4 Great Recession 1 Great Recession 2 Latest Data 3 Real GDP Average Q/ Q% @ AR 3.0-2.8 2.2 2.6 Real Consumption Average Q/ Q% @ AR 3.3-1.8 2.4 2.8 Index of Consumer Sentiment Average Index 91.2 63.6 81.0 93.4 Employment Growth Average change in jobs (thous.) 136.9-410.7 160.8 209.0 Unemployment rate Average % 5.4 6.8 7.1 4.3 Corporate Profits Average Q/ Q% @ AR 10.7-8.4 12.1 1.3 ISM-Manufacturing Index Average Index 51.7 43.3 54.0 56.3 New and Existing Home Sales Average, Thousands 5,192 4,059 4,629 5,490 Real Oil Prices - West Texas Intermediate Average $/ bbl (2016 prices) 42.00 93.11 79.65 45.90 PCE Inflation Average Y/ Y% Change 2.3 2.0 1.4 1.4 Fed Funds Rate Average % 4.38 1.35 0.21 1.16 Notes: 1 January 2008 through June 2009 2 Beginning in July 2009 for monthly data or 2009:Q3 for quarterly data 3 Latest month or quarter
Vehicle sales are anticipated to edge lower over the next two years 18 17 16 15 14 13 12 11 10 Vehicle sales millions of units Blue Chip Light Vehicle Sales Forecast Actual Forecast 2016 2017 2018 17.5 16.9 16.8 1980 '85 '90 '95 '00 '05 '10 '15
Summary The outlook is for the U.S. economy to expand at a pace around trend through 2019 Employment is expected to rise moderately with the unemployment rate remaining very low Inflation is forecast rise to the Fed s Inflation target next year Vehicle sales are anticipated to edge lower through 2018 Long-term outlook for vehicle production remains very positive
www.chicagofed.org www.federalreserve.gov