U.S. Vehicle Sales (December 2019)

December vehicle sales end the year on a slightly softer note  

• U.S. vehicle slipped to 1.36 million units (seasonally adjusted) in December. On a seasonally adjusted annualized basis, sales fell to 16.7 million (-1.7% m/m) on the month, leaving the tally for the year at 16.9 million units, down 1.7% from 2018 levels. 
• In terms of the December split, all of the declines were concentrated in the light truck segment (-3.6% m/m), while sales of passenger vehicles rose (+1.3% m/m) modestly. 
• Of the brands still reporting monthly figures, sales of Nissan (-29.5% y/y) and Honda (-12% y/y) were down sharply compared to year-ago levels, while Toyota (-6.1% y/y) and Subaru (-3.4% y/y) had more modest declines. Sales of Kia (+8% y/y) and Hyundai (+1.9% y/y) were higher. 

Key Implications

• Another solid year for US vehicle sales. Despite coming in a touch below the 17-million mark, overall sales remain slightly above trend growth (16.7 million), which is impressive for this stage of the business cycle.    
• In looking for reasons that may have contributed to December's weakness, it would appear that weak inventory certainly played a role as it fell to a 7-year low. This helped reduce the pressure on automakers to rid dealer lots of inventory, which was reflected in the fact that incentive spending fell to just 3.6% y/y, compared to the 11.2% y/y increase seen in the month prior.  
• From a quarterly standpoint, fourth quarter sales slipped to their lowest level since late 2014. While we chalk this up to a few one-off factors (GM strike, lower incentive spending to end the year), it does imply a weaker handoff heading into 2020, as well as a smaller contribution to overall Q4 GDP growth (currently tracking 1.6%) as a result of softer consumer spending. That being said, continued income and wage gains, alongside a still robust labor market should support a level of sales in the 16.7-16.9 million range for 2020. 

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.