Consumer Payment Card News

Consumer Sentiment and New Car Sales Stuck in the Mud Since 2017

Consumer Sentiment

No matter how you slice or dice it, U.S. consumer sentiment, since the current Administration has taken office, has made no statistical gains building on the robust economic growth coming out of the 2007 to 2009 “Great Recession.” The negative effect of the “GOP Tax Cuts,” with little trickle-down to U.S. workers, and severe “SALT” pain for middle class taxpayers, is now showing up in consumer survey data.

The NFIB Small Business Optimism Index improved modestly in March, increasing 0.1 points to 101. The Uncertainty Index dropped six points to 79, returning to a more normal level for recent years.

On top of these tidbits of consumer economic concern is new data showing weak new automobile sales. However, retail sales are showing signs of an uptick.

Consumer Sentiment

The University of Michigan Index of Consumer Sentiment finds the Index of Consumer Sentiment and the Current Economic Conditions Index has declined since the start of 2019. The Index of Consumer Sentiment has declined 1.6% in April, compared to April 2018. The Current Economic Conditions Index is now down 2.3% over the past year. Furthermore, the Index of Consumer Expectations is down 1.1% over the past year.

The University of Michigan reports only 44% of consumers anticipated economic improvements in the year ahead with 8% expected worsening finances.

Nevertheless, the University of Michigan expects inflation-adjusted personal consumption expenditures to grow by 2.5% in 2019.

Auto Sales

New vehicle retail sales in April are expected to fall 5.3% compared to this time last year. The industry continues to show signs of softness with April representing the 10th straight month of year-over-year retail sales declines.

A report/forecast by J.D. Power and LMC Automotive concludes new vehicle prices in April are on pace to reach $33,695—the highest ever for April—and are up nearly 4% (+$1,235) from last year. Incentive spending has also declined to $3,408 per unit, $300 less than the same period a year ago.

Sales to-date in April for vehicles under $20,000 are down 25% from last year, but demand for vehicles costing $40,000 and higher are up 7%. Younger buyers have been affected most in the current environment. Among buyers 16-35 years old, sales are expected to fall 8% in April vs. a decline of only 4% for buyers over 55.

LMC’s forecast for 2019 total light-vehicle sales is holding at 16.9 million units, a decline of 2.2% from 2018. Continued strong performance from fleet is expected to offset retail softness, with the forecast for retail light-vehicle sales falling to 13.5 million units, a decline of 2.6%.

Retail Sales

Retail sales were up 1% in March from February and up 0.8% year-over-year. The National Retail Federation (NRF) says consumers were busy in March after weaker-than-expected spending earlier, in the wake of a brutal winter, government shutdown damage and lower tax refunds.

The change of seasons is always a factor because of the weather, and a later Easter and Passover this year mean holiday-related sales that took place in March last year won’t come until April this year and sizably impact year-over-year comparisons.

NRF March Retail Sectors

•   Online and other non-store sales were up 9.2 percent year-over-year and up 1.2 percent month-over-month seasonally adjusted.

•   Health and personal care stores were up 1.6 percent year-over-year and up 0.2 percent month-over-month seasonally adjusted.

•   General merchandise stores were down 0.5 percent year-over-year but up 0.7 percent month-over-month seasonally adjusted.

•   Building materials and garden supply stores were down 0.7 percent year-over-year but up 0.3 percent month-over-month seasonally adjusted.

•   Furniture and home furnishings stores were down 1 percent year-over-year but up 1.7 percent month-over-month seasonally adjusted.

•   Grocery and beverage stores were down 1.1 percent year-over-year but up 1 percent month-over-month seasonally adjusted.

•   Clothing and clothing accessory stores were down 2.6 percent year-over-year but up 2 percent month-over-month seasonally adjusted.

•   Electronics and appliance stores were down 4.1 percent year-over-year but up 0.5 percent month-over-month seasonally adjusted.

•   Sporting goods stores were down 10.8 percent year-over-year and down 0.3 percent month-over-month seasonally adjusted.