ATLANTA — According to data from the recently released Q2 2019 Cox Automotive Dealer Sentiment Index, U.S. auto dealer sentiment is similar to the first quarter as the overall current market index remained in negative territory.
The current market index — a measure of business conditions in Q2 2019 — rose one point to 49, which is not a statistically significant increase. Again this quarter, the index shows that slightly more dealers feel the current market is weak compared to those who feel the current market is strong.
Analysts said improvements in key drivers supported the slight upturn in the current market view. The customer traffic index, reflecting expected seasonality, and profit index both saw statistically significant gains from Q1. Meanwhile, the costs index saw a decline. The traffic index is at its highest level ever and the profit index is tied with its highest reading, while the cost index is at its lowest point, dating back to the start of the survey in Q2 2017.
“The overall view of the market is remarkably stable this spring relative to the beginning of the year,” said Cox Automotive Chief Economist Jonathan Smoke.
Moderating cost pressures, less concern with market conditions and interest rates, and fewer challenges from regulations are the key measurable differences relative to this time last year.
Expectations for the next quarter fell but remained in positive territory at 55. The decline was driven by a big drop in expectations by independent dealers. By contrast, expectations for the next 90 days were unchanged among franchised dealers.
Based on the way dealers describe the market, used-vehicle sales saw gains in Q2 from Q1 but remained similar to year-ago levels. The index on used-vehicle inventory, however, fell and was noted as declining, which was a reversal from the growth trend last quarter. That trend draws into question whether strong used-vehicle sales can continue as inventories tighten, analysts said.
New-vehicle sales were stable compared to last quarter and last year, but new-vehicle inventory is growing. The new-vehicle market is an interesting contrast to the used market, as the used market is stronger and improved quarter over quarter. Used-vehicle inventory is also declining while new-vehicle inventory is expanding.
“It is encouraging to see that dealers remain optimistic,” Smoke added. “But their outlook has moderated substantially from the peak in optimism we saw last year as numerous negative factors continue to dampen future expectations. If market strength is being driven by used vehicles, can used-vehicle sales remain strong considering declining inventory? That’s a concern to watch in the coming months.”
To review the Q2 report in its entirety, click here.
Originally posted on Auto Dealer Today