Slumping new vehicle sales in the US last month, due to continued high prices and low inventories, have some analysts worried that the lower-than-expected results could be a harbinger of a broader economic downturn.
Sales of new vehicles fell to 12.8 million at a seasonally adjusted annualized rate, representing an 11 percent drop from April, data compiled by Wards Intelligence showed.
That is the lowest level since December last year and reflects shrunken inventories amid a persistent shortage of semiconductors and near record-high vehicle prices.
With increasing worries about macroeconomic headwinds, two analysts registered concern that the downbeat data could be a taste of tougher times to come, even as automakers expect a recovery as supply-chain woes ease.
“The market appears increasingly concerned about the economy, inflation, rising interest rates and a recession,” RBC Capital Markets analyst Joseph Spak wrote in a research note to clients published on Thursday.
While Spak said there are no signs of “demand destruction” in the latest data, a recession would likely keep new monthly vehicle sales in the low 12 million range, not far from the rate seen last month. He lowered his demand forecast for the year to 14.7 million from 15.2 million.
Sales were slow enough last month that Daiwa analyst Jairam Nathan cut his firm’s SAAR estimate for this year from 16 million to 15 million with “further downside likely.”
Last month had three fewer selling days than April, and both
Spak and Nathan added that that the daily selling rates were basically flat when compared with April, given that last month had three fewer selling days than the month before.
However, that did not give the analysts much consolation, as May is typically a month where automakers see a sales bump.
Evercore ISI analysts wrote in a note that despite disappointment over “sour” sales last month that undercut expectations, “fears of a broad-based consumer slowdown” have not shown up in consumer demand surveys.
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