Topic: economic analysis
In the US, the automotive market’s recovery from COVID-19 will be as unique as the recession it spurred—and it will vary by state. The main reason for this is that consumer demand is highly affected by the increase or decline of COVID-19 cases in a particular state. Areas where the wave of infections came early saw a steep pullback in leads in late March and early April but have since started to recover. In contrast, states where cases of the virus are just now peaking are seeing leads decline rapidly and are at, if not below, early-February levels.
In this article, I’ll look specifically at two states, New York and Texas, and how COVID-19 has impacted each market.
The COVID-19 pandemic has had a sweeping impact on the economy. Almost overnight, it brought businesses across the country to a near halt, resulting in a record number of jobless claims and a recession unlike any other.
In this presentation, I’ll take a look at many of the unique factors—decreased consumer confidence, supply chain disruption, and increasing pent-up demand—that continue to make this COVID-19-driven economic downturn so unique. I’ll also cover how the recession continues to evolve and what it means for the auto industry.
As states begin to reopen and CarGurus leads trend upward again, it seems we might be through the trough. These signs indicate that the US might soon emerge from the worst of the COVID-19 pandemic. However, we must be cautiously optimistic because it’s unlikely that the unemployment rate has reached its peak or that we are fully in recovery mode. And for the auto industry, there is an additional headwind on the horizon: credit availability.
While demand for vehicles is growing—US lead volume on CarGurus has nearly returned to the same level as February—the sales bounce back in the auto market may be tempered by the availability of credit.
While I personally think we’re weeks, if not months, away from knowing exactly how long the economy will take to fully rebound, consumers are coming back—and they’re submitting leads. In fact, U.S. leads* on CarGurus are almost at the same level they were at the start of February. Yes, February generally represents a smaller share of units sold than March and April, but the fact that consumer interest is trending up this early is a positive sign.
While total U.S. lead volume on CarGurus has nearly returned to the same level as February, lead volume varies by price bucket, and I’ll dig deeper into this below.
As the economic data catches up with the COVID-19 pandemic, we’re poised to start seeing many economic indicators at historic levels or levels we haven’t seen since the Great Depression. One example of this is jobless claims, also referred to as unemployment claims, which set a new record the week ending March 28, 2020, when 6.6 million people filed for unemployment.
While the number of jobless claims set a record at the federal level, the impact at the state level has also been unprecedented. In the coming weeks, many states will surpass the number of claims filed throughout the entirety of 2019—and that’s if they haven’t already.
The automotive sector has played a role in the jobless claims number, but due to self-isolation policies, leisure, hospitality, and retail have had the largest impact. A turnaround will happen though. When the self-isolation guidance from the federal and state levels ends, Americans will resurface and go out once again. Demand for services and goods (like vehicles) will return and the jobs will follow, but it might take some time before we reach a new normal.