According to the U.S. Census Bureau’s most recent release of international trade in goods and services, imports of goods decreased by $4.1 billion to $270.1 billion.
While areas such as industrial supplies and capital goods fell by $4.7 and $1.1 billion respectfully, automotive vehicles, parts, and engines however increased by $1.1 billion.
China, Canada, and Mexico are considered the United States top 3 trading partners. Typically, China ranks number 1 followed by Canada, and then Mexico. August census data tells an interesting story as China falls to the #3 spot, followed by Canada and Mexico at #1.
Two of the top 3 imports into the U.S. from Mexico in the most recent release were motor vehicle parts and passenger vehicles.
The news of automotive growth in an overall trade environment of decrease is a good sign given the multitude of supply chain and labor related issues that have plagued the automotive realm over the past year.
According to Cox Automotive, in September new car and truck inventories reached their highest levels since June of 2021 – or roughly a 42-day vehicle supply for dealers on average (compared to pre-pandemic levels of 65+ days).
Many analysts believe that depleted inventories have had a major impact on automotive sales over the past year.
Ford being one of many autos still combating supply chain issues has stated that they have between 40k-45k built vehicles waiting on parts that they plan to deliver in Q4. The supply and demand imbalance costing Ford an estimated $1 billion in increased vendor costs over the past quarter.
The increased manufacturing costs being directly reflected in the average cost of a new vehicle now up 6.3% in Sept to $45k according to J.D. Power.
As inventories slowly recover and supply chains remain slightly less stressed one concern continues to emerge.
With the holiday season approaching and consumers already expected to spend exponentially less on non-durable goods, will continually rising interest rates and way above average vehicle costs keep automotive sales from exceeding expectations?
Or have consumers reached a breaking point where convenience outweighs the cost of keeping their aged vehicles out on the open road.
Given that just in 2021, U.S. motor vehicle and parts dealers generated revenues of almost 1.53 trillion dollars from retail trade alone. And according to the BLS, there are over 1 million Americans employed in just the motor vehicle and parts manufacturing work force.
Keeping an eye on what transpires in the automotive sector throughout the remainder of the year is important as it will have a major impact on freight movement and the economy overall as we get deeper into Q4.
This has been your Bridge Logistics Weekly Market Update for the week of October 18th, 2022.