Pub. 18 2019-2020 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 23 new jersey auto retailer W W W . N J C A R . O R G The Fed has signaled that we will not see any interest rate increas- es in 2019 and some believe that we may even see an interest rate cut of 25 basis points before the end of the summer. This will help slow the monthly payment creep that we saw in 2018. Payments will still likely increase throughout the remainder of the year be- cause of rising vehicle costs, but we won’t have the added pressure of cost increases coming from rising interest rates. We have seen credit standards tightening in recent months with a larger share of auto loans being made to more creditworthy customers. We expect that this will continue throughout the year as well. What are some macroeconomic indicators that could impact auto sales? Manzi: Consumer confidence readings have been volatile in recent months due to trade-related uncertainty, but still remains high and indicates that consumers will still be willing to make large purchases. Economic growth is slowing, and second quar- ter 2019 GDP growth was 1.5 percent, down from 3.1 percent in the first quarter of 2019 and significantly lower than the tax cut boosted growth rate of 4.2 percent in second quarter of 2018. For the year, we expect GDP growth to return to a more long- term trend level of growth just above 2 percent. Unlike last year, the positive effects of tax cuts will be less pronounced this year. Job gains seem to be slowing in the late stages of what is now the longest period of expansion on record. And there’s uncertainty surrounding the implemen- tation of tariffs on imported autos and auto parts which, if implemented later this year, will cause new vehicle prices to rise and sales to fall. Are you sticking to your original forecast of 16.8 mil- lion light vehicle sales in 2019? Manzi: Yes. New light-vehicle sales will likely continue to decline for the rest of the year compared to 2018, but we remain confident, barring any unexpected shocks, that franchised dealerships are on track to sell 16.8 million new light vehicles in 2019. The downside risks to our sales forecast include the fallout from trade disputes, including potential tariffs on autos and auto parts, and the Fed changing course on interest rates. A Quick Look Back at 2018 New light vehicle sales in 2018 surprised many in the industry. Looking back to the start of the year, many across the industry expected sales to fall somewhere below 17 million units. Then came the passage of new tax laws which put more money in the pockets of the average American new car buyer and provid- ed additional incentives for business owners to purchase new trucks and SUVs for their businesses. A strong and still expand- ing labor market that caused wage growth to accelerate didn’t hurt the vehicle sales market either. We saw consumers abandon sedans and small cars for mid-size and compact crossovers in droves. At the same time, we saw record sales of EVs and plug- in-hybrids. Patrick Manzi is the Senior Economist at the National Automobile Dealers Association (NADA). He can be reached at 703.821.7293 or via email at pmanzi@nada.org. 0 REAL SOLUTIONS FOR YOUR BUSINESS CALL US TODAY. 800.601.0816 BENEFITS & INSURANCE Our understanding of your business and your insurance needs is the basis for designing a benefits strategy that works.