COVID-19 "worrisome" in US - analysts - Just Auto
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COVID-19 “worrisome” in US – analysts

14 Oct 2020

As the autumn (fall) progresses, the trends in the US for COVID-19 are "worrisome", according to Cox Automotive analysts.

"Daily new COVID-19 cases continue an upward trend. The case growth is accelerating and causing higher hospitalisations as well. The impact on the economy continues," they said in a report.

"Consumer sentiment has been bumpy, the jobs recovery has lost momentum, and the retail vehicle market has softened… this fall. Used vehicle prices are coming down. High unemployment and the lack of more stimulus will likely lead to less spending and more credit issues in the weeks ahead."

Cox said US consumer credit declined in August and "severe delinquencies started picking up in September even though loan accommodations remained elevated".

The Federal Reserve reported consumer credit excluding housing related debt declined in August. Revolving credit (credit card balances) fell while non-revolving debt (auto loans and student loans) increased somewhat, and the smallest monthly increase this year except for April.

"Declines in student loan originations were likely larger than auto loan declines, but we know that retail sales of new and used vehicles softened in August just as the expanded unemployment benefits expired at the end of July."

Though weekly reports from Equifax show rising delinquencies in each week through 22 September, the severe delinquency rate is still lower than it was pre-pandemic or last year because loan accommodations remain elevated. Credit conditions are likely to deteriorate rapidly as fiscal support fades.

Cox said the jobs recovery in the US had lost momentum.

"The latest data show 11m on traditional unemployment benefits, which are limited to six months of coverage, but 25.5m remain on some form of unemployment benefits, including pandemic unemployment assistance, which provides coverage beyond six months.

"By this point six months ago, more than 11m people had filed for unemployment assistance, and those initial 11m would no longer qualify for continued traditional assistance. Initial claims were down modestly to 840,000 but remain very high by historical standards."

Cox said consumer sentiment had been "bumpy so far in October, but it is not declining yet". Sentiment was now down by 18.8% compared to the end of February but was slightly better at the end of September.