Why Early 2021 Doesn’t Look Much Better So Far, For Autos, Consumer Confidence

The coronavirus pandemic will continue to cast a shadow over shopping for a car or truck into 2021, including a relative shortage of new vehicles in stock, and lower consumer confidence, according to analysts for LMC Automotive.

In general terms, monthly U.S. auto sales have largely rebounded from last spring, but the pandemic continues to generate enough worries, like jobs and the unemployment rate, to affect “consumer appetite for making a big purchase,” said Jonathon Poskitt, director of Global Sales Forecasting for LMC Automotive.

Separately, on Nov. 25, the Consumer Sentiment Index from the University of Michigan Surveys of Consumers fell to 76.9 in November, down from 81.8 in October. A year ago, the November 2019 index was 96.8.

University of Michigan economist Richard Curtin, director of the surveys, said in a report that further declines in optimism are likely, if coronavirus infections and deaths rise as anticipated in the months ahead.

Meanwhile, positive signs include a recovery in jobs relative to April, when U.S. unemployment was nearly 15%, LMC’s Poskitt said in a webinar. In October, 640,000 jobs were added, but unemployment was still high, at a 6.9% rate, he said.

“That’s certainly an improvement from where we were earlier in the year. But that lingering impact … is going to act as a brake on more robust recovery in 2021, and indeed beyond,” Poskitt says.

U.S. stock markets are generally positive, too, especially with a recent boost from news that effective vaccines appear to be in the pipeline.

“While that’s certainly good news … it’s going to take time to get through the population,” Poskitt says. “We expect it will be well into 2021 — mid-year and beyond — before that takes place.”

LMC Automotive predicted that due to pandemic-related shutdown earlier this year, North American auto production would be 17 million in 2020, down about 16% from a year ago. The LMC Automotive forecast for 2021 is 18.5 million, an increase of 8%, but still below the total of 20.2 million in 2019.

Justin Cox, director of Global Production Forecasting for LMC Automotive, said the U.S. market “may not see normal inventory levels until mid-2021.”