Auto industry indicators
Previously, we discussed how the US job market is shaping up. Apart from the key jobs data, auto investors also should look at recent trends in consumer confidence that reflects consumers’ sentiment toward the economic prospects of the country.
US consumer confidence index
The US consumer confidence index data is compiled by the University of Michigan and Thomson Reuters and are reported on a monthly basis. The Survey Research Center conducts the underlying survey, which consists of at least 500 telephone interviews with a cross-section of consumers in the continental United States.
In the chart above you can see the recent trends in the US consumer confidence index. The index has been on an uptrend after hitting a low of 87.2 in September 2015. In May 2016, the index stood at 94.7, showcasing optimism among consumers, and so the index seems to be inching up toward a ten-year high of 98.1, posted in January 2015.
Now, let’s take a look why consumer confidence of a country also acts as an auto industry indicators.
What does it mean for auto investors?
A higher Consumer Confidence Index is positive for US vehicle sales. An increase in consumer confidence is one of the possible reasons that justifies the uptrend in auto sales. Many Wall Street analysts expect US auto sales to cross the psychological barrier of 18 million vehicle units per year going forward.
Note that US auto sales were at its historically highest level in 2015, with 17.4 million vehicle units sold during the year. Major automakers (XLY) including General Motors (GM), Ford (F), Toyota (TM), and Fiat Chrysler (FCAU) benefitted with this positive trend in the US auto industry last year.
Continue to the next part for a look at how currency movement affects the profitability of automakers.