Today, our Director of Automotive Industry and Economic Analysis, George Augustaitis, and our Director of Consumer Insights, Madison Gross, team up to take a look at how consumer sentiment is trending among CarGurus shoppers.
We first mentioned the importance of consumer sentiment when we kicked off this COVID-19 series, and we’re going to dive in a little deeper with it. This is an important indicator for the industry because if a consumer isn’t confident in the economy, their job stability, or their ability to find a new job, they will be less likely to make a big-ticket purchase, such as a vehicle. When confidence is low many consumers will turn to the used vehicle market due to the lower price points, but others will wait until they feel more positive about their job security and the economy.
Because consumer confidence and consumer sentiment numbers don’t fully reflect yet the impact that the COVID-19 pandemic is having on the economy, we’re running two polls on cargurus.com. These polls allow us to track and trend how CarGurus shoppers currently feel about the economy and their sentiment about its future.
Since March 16, we have been trending the following two questions to our shoppers:
- Current sentiment: Compared to a week ago, how do you feel about the economy?
- Forward-looking sentiment: By September, how do you expect to feel about the economy?
Current sentiment is not all doom and gloom
Since first posting the question on Monday, March 16, there has been a gradual increase in optimism about the economy. The portion who feel the economy is somewhat or much better than last week has increased from 11% to 22%. Although we are still in the early stages of the pandemic, there is a growing number of auto shoppers who are feeling more optimistic about the economy as compared to the preceding week.
However, we would be remiss to not see the other side of the same coin: 54% of shoppers on cargurus.com indicate that the economy is worse when compared to the previous week. It is not surprising that most shoppers on our site feel worse about the economy as jobless claims continue to increase and uncertainty mounts about how much longer we will be in quarantine.
The portion who said the economy is ‘about the same’ as the prior week was just 17% during the week of March 16, compared to about 25% in the following weeks. Looking back, things changed rapidly during the week of March 16 – people started working from home, kids were home from school, and new business challenges arose as stay-at-home orders were introduced.
This explains the relatively low number of consumers who felt the economy was ‘about the same’ as the prior week.
Since that initial week of polling, the percentage of people who said ‘about the same’ has been higher – around 25%. We could interpret this as positive, negative, or neither. Meaning there were those that were thinking: I feel the economy is as bad as it was last week, I feel the economy is as good as it was last week, or the economy is just the same, neither bad nor good.
While it’s positive to see that more consumers feel the economy is better than last week and fewer feel the economy is worse than last week, it’s still very early. The Consumer Insights and Industry Insights Team at CarGurus will continue to track the polls and provide updates as the numbers change.
Recent jobless claims and jobs report impacting forward-looking sentiment
Based on timelines from the Center for Disease Control (CDC) and the administration, we felt that looking to September – six months from the start of our data collection – was the best approximation for when the COVID-19 pandemic would be significantly diminished and the economy would resemble a ‘new’ normal.
After early stability, expectations for where the economy overall will be by September fell last week. Note that we posted the survey on Thursday, April 2 and fielded it through Sunday, April 5. While shoppers on our site were taking the survey, the weekly jobless claims number hit an all-time high of 6.6 million, totaling 10 million jobless claims filled in a two-week period. Additionally, the jobs report, which came out that Friday, resulted in an increase in the unemployment rate to 4.4% after hitting a 50-year low in February. While we can’t be certain the two are connected, media coverage of these events, rising speculation (by some) of being on the verge of a depression, and the rocky start to the small business loan program from the most recent stimulus package may have together impacted last week’s sentiment numbers.
How near- and long-term consumer sentiment impacts vehicle sales
Understanding current consumer sentiment and long-term sentiment are equally important when considering the impact on vehicle sales. With only 23% of consumers indicating the economy is in a better position this week as compared to a week ago, we know that many consumers are still not feeling confident enough to purchase a big-ticket item like a new vehicle. However, with nearly 50% of CarGurus shoppers indicating they feel more confident about the economy’s outlook come September, it’s reassuring to see a positive, forward-looking perspective regarding the economy.
While many shoppers may delay purchasing a new vehicle today, when the economy recovers so will consumer sentiment. This will drive consumers back to the showroom and auto sales will bounce back and recover.
The next few weeks will be very important for the economy and the automotive market though. Projections from the University of Washington indicate that many large cities will hit their peak COVID-19 infection curves in the coming weeks, so it’s possible that by the third week of April we will feel much more certain about how much longer it will take for the economy to return to a ‘new’ normal.
If you have specific questions about economic trends and their impact on your business, please reach out to me at email@example.com, so I can address them in future posts.