The latest update from Canadian Black Book indicates that wholesale prices slowly declined, car segments for 2-8 year-old vehicles slipped 0.60%, and trucks, SUVs and crossovers fell by 0.85%.
The news comes as no surprise for anyone that has been keeping tabs on CBB’s COVID-19 market update, which a week earlier revealed a decline in wholesale-retail prices and buyer confidence.
“So far during the pandemic crisis we have seen Car and Truck/SUV/Crossover prices drop by about 0.5% per week at wholesale,” said CBB. “As you might have read in an earlier update back in April, we saw the largest monthly drop in wholesale prices since Canadian Black Book’s value retention index was created in 2005.”
CBB’s price index fell an additional 3.20 points, bringing it close to April’s record decline of 3.58. And since February, it has declined 7.8 points due to COVID-19 and its impact on the market.
Wholesale and retail prices are expected to decline even further due to a large influx of used vehicle inventory headed towards the market, and lower consumer demand due to the economic depression.
“Although sales did show a strong uptick in May, we feel that a large portion of that lift was pent-up demand from late March and April,” said CBB. “Once that demand has been met, we expect to see the natural tempo in the marketplace.”
On employment, Statistics Canada recently released the results of its May labour survey and found that unemployment has reached 13.7% in Canada — the highest rate ever recorded since 1976. Prior to COVID-19, unemployment sat at 5.6%. These unemployment numbers are expected to improve as Canadians begin the process of returning to work.
Unemployment is in part tied to consumer confidence towards purchasing vehicles. And as CBB remarks, consumer confidence for the auto sector “is a critical measure of the industry’s prospects for sales.” Currently, consumer confidence is up 16.2 points for May after a record low in April, according to the Consumer Confidence Index.
“The index now sits at 63.7, which is slightly higher than its lowest point during the 2008 financial crisis,” said CBB. “This index is still down 60 points from February’s pre-pandemic mark. Over half of Canadians remain pessimistic about their future employment prospects at 52.2%, which does not bode well for the speed of recovery across Canada.”
Overall, the economic effects of the crisis are expected to be felt even three years from now, with wholesale values anticipated to return to the pre-COVID-19 baseline by 2023.
