Strong U.S. Auto Sales Fueled by Growing Economic Optimism
RAMSEY, N.J. (PRWEB) December 01, 2017 -- Vehicle purchase intent remained robust in November, as deep discounts on outgoing models, and a strengthening economy provide consumers with a favorable environment to purchase new vehicles. TechnoMetrica’s Auto Demand Index improved for the second straight month in November, gaining one point to register a score of 111. Therefore, we expect auto sales will conclude the year maintaining a strong pace of growth.
TechnoMetrica Market Intelligence developed the Auto Demand Index, or ADI, as a way to measure the intent of consumers to buy or lease a new vehicle within the next six months. Raghavan Mayur, president of TechnoMetrica, explained that the ADI, which is conducted monthly, is based on the response to a key question posed to more than 900 adult Americans: How likely is it that you will buy or lease a new vehicle within the next six months?
After waning throughout the summer, the Index has improved significantly in recent months. November marks the second consecutive month in which the Index has posted a reading above 100, signifying growing strength in purchase intent. Further, this month’s score registered above all three of its moving averages, while both the 3-month and 6-month averages increased for the second month in a row. Thus, consumers’ intent to purchase new vehicles should continue to grow in the near future.
The recent rise in the Index corresponds with the robust growth in new vehicle sales over the past few months. Auto sales recorded their strongest performance of 2017 in September, rising at an annualized rate of 18.57 million vehicles, a 12-year high. Further, for the first time this year, sales increased at an annualized rate over 18 million vehicles for the second consecutive month in October.
Our data suggests that auto sales are likely to maintain this momentum in the months ahead. In November, our indicator for momentum, the MACD score, reached positive territory for the first time since March, gaining 1.7 points to a reading of 0.7. Thus, although full-year auto sales are likely to fall short of the record set in 2016, we anticipate that new vehicle sales will continue to grow at a brisk pace in the short-term.
“Increased economic confidence and generous deals on outgoing 2017 models have fueled robust levels of purchase intent among consumers,” said Raghavan Mayur, president of TechnoMetrica. “Therefore, although new vehicle sales may have already peaked, we expect sales to maintain a strong rate of growth in the coming months.”
Purchase intent improved across most demographic groups in November. Of the twenty-three segments that TechnoMetrica tracks each month, 15 registered Index readings above 100, compared with eleven the previous month. Consumers’ earning $100K or more a year (135), parents (124), and rural Americans (122) showed the greatest intent to purchase a new vehicle in the near future. In addition, purchase intent levels rose among 19 segments this month, with Millennials aged 18 to 24 (+25), urban residents (+17), and those earning an income of $100K or more (+16) recording the most significant improvements in the Index reading.
The rise in vehicle purchase intent among Americans has largely been driven by growing confidence in the U.S. economy. The IBD/TIPP Economic Optimism Index, our monthly measure of Americans’ sentiment towards the economy, rose to an eight-month high in November, reflecting increased optimism regarding the labor market. The economy continues to move closer to full employment, with the unemployment rate falling to a 17-year low in October. Consumers have also been encouraged by the record-breaking gains in the stock market.
Increased incentives and discounts are also luring prospective buyers to dealer lots. Average incentive spending climbed 16.5% in October, to $3,472 per vehicle, according to the automotive information platform Edmonds. The holiday season will likely bring even more generous discounts, as automakers move to clear their lots for the incoming 2018 vehicle models. Edmonds estimates that Black Friday sales alone account for about 15 percent of overall November transactions.
Replacement demand in the wake of devastating hurricanes continues to lift purchase intent, as well. Hurricanes Harvey and Irma, which inflicted nearly $200 Billion in damage on affected areas, destroyed close to one million vehicles in the South. Thus, it is not surprising that purchase intent among consumers residing in the southern U.S. improved for the second consecutive month in November.
Besides keeping a pulse on consumers’ intent to purchase new vehicles, TechnoMetrica also monitors the brand preferences of prospective buyers on a monthly basis. American brands claimed the top two spots in brand choice this month. Ford was consumers’ most preferred brand in November, with a 13% share of likely buyers, followed close behind by Chevrolet, the top choice among 12% of consumers. Toyota, last month’s most popular brand, dropped into a third-place tie with Honda, which gained two spots from October. Both brands garnered an 11% share of prospective buyers. GMC, the preferred choice among 5% of consumers, rounded out this month’s top five in Americans’ favorite auto brands.
In terms of vehicle type, mid-size cars remain the preferred choice for consumers. This month, one in five prospective vehicle buyers plan to acquire a mid-size vehicle as their next auto purchase. Small SUVs continue to be a popular choice among consumers, as well. The share of consumers planning to acquire a Small SUV grew by two points from October, to 17%. Meanwhile, preference for compact vehicles improved significantly this month, climbing four points to a share of 14%.
Each month, TechnoMetrica uses Random Digit Dial telephone methodology to conduct live interviews with more than 900 respondents, using both landlines and cell phones. The margin of error for the survey is +/- 3.2 percentage points. In addition, recent statistical analysis has shown a strong correlation between the Auto Demand Index and actual U.S. vehicle sales.
Tom Westervelt, TechnoMetrica Market Intelligence, http://www.technometrica.com, +1 (201) 986-1288, [email protected]
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