- The auto industry has seen an increase in sales over the past few months, but this is still lower than pre-pandemic levels.
- The recovery in sales varies by sector, with consumer sales recovering more than business sales.
- The auto industry is considered to be mean reverting, meaning that periods of lower-than-normal sales are usually followed by periods of higher-than-normal sales.
- However, the opposite is also true, with periods of higher-than-normal sales followed by periods of depressed sales.
- Despite the recovery in consumer sales, it is unlikely that consumer vehicle purchases will accelerate much further due to higher interest rates and low consumer sentiment.
- If overall light vehicle sales are to return to pre-pandemic levels, it would likely be due to a surge of pent-up demand from businesses. However, high interest rates and weak sentiment on investment suggest businesses aren’t ready to embark on a spending spree yet.
- Recent surveys of business investment sentiment have fallen to levels observed right after the COVID-19 recession, suggesting that businesses may be slowing down on investment purchases.
In conclusion, despite the recent uptick in auto sales, the industry may face challenges in the future due to factors such as high interest rates, low consumer sentiment, and weak business investment sentiment.
Source: https://www.richmondfed.org/research/national_economy/macro_minute/2023/mm_05_16_23
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