The Index of Consumer Confidence jumped 2.8 points in July to reach 82.5 (a positive sign for potential car-buying) while wholesale prices remained relatively stable, according to Canadian Black Book’s latest update for the first week of August.
The truck/SUV/crossover segments experienced increases in wholesale prices of 0.28%; car segments, on the other hand, declined slightly in value by 0.04% for the week.
“It is our team’s expectation that wholesale values will struggle going into the fall and early winter until a more lasting public health and economic recovery arrives,” said CBB. “Last week also marked the announcement of Statistics Canada’s monthly labour force survey. As expected, there was good news in the numbers. The unemployment rate fell by 1.4%, from 12.3% to 10.9%.”
The new rate nearly doubles that of January, though CBB considers the current downward trend in unemployment numbers “very encouraging.” Several economists, they said, were forecasting double-digit rates as the rule for the year, though it seems the economy is already moving towards the single digits — and ahead of schedule.
In fact, employment in July increased approximately 419,000 jobs — about 2.4%. And although it was less than the 953,000 jobs in June (5.8% increase), CBB said the numbers were still very strong in July.
“This past week, Scotiabank in their monthly Global Economics Auto News Flash reported that, in their opinion, a ‘solid rebound’ is underway here in Canada, certainly some good news,” said CBB. “The bank cites that second quarter gross domestic product performance shows the Canadian economy had already recovered a remarkable 43% of the COVID-19 losses by the end of June.”
Scotiabank revised its annual new car sales forecast up to 1.6 million units from 1.5 million for the year. But there are still significant risks due to recent pandemic-related developments in the U.S., according to the bank.
On the auction front, CBB says wholesale auction volumes continue to be strong. It estimates that auctions are still moving between 70-80% of normal volume, even with the lack of physical activity through the lanes.
“Looking towards the later part of summer and into the fall, it is Canadian Black Book’s expectation that overall volume at auction will increase and may ultimately exceed volumes versus last year,” said CBB.
The lack of supply on dealership lots is a concern, and retailers have reported that they continue to hold onto many trades — trades they would have typically been sent to auction. The number of vehicles available for sale at wholesale have declined due to low levels of trade activity (this, from the beginning of the pandemic through mid-May), below normal lease-return activity, and very little repossessions.
However, CBB is anticipating an increase in repossessions throughout the year. And a boost in wholesale stock can be expected in the coming months thanks to the remarketing of repossessed units and playing catch-up in lease returns that stem from lease-end deferrals.
