SEMA INDUSTRY INDICATORS APR 2018 The final estimate of fourth quarter GDP, published in the last month, showed upwardly revised economic growth for the quarter of 2.9 percent. This in turn makes 2017 one of the strongest years of the expansion. While incoming data continues to dampen projections for first quarter GDP, this is likely driven by poor seasonal adjustment and not a decisive shift from trend. Underlying economic fundamentals remain broadly intact. CURRENT OUTLOOK FUTURE OUTLOOK NEGATIVE POSITIVE NEGATIVE POSITIVE Consumer sentiment hit new highs and it is worth noting that sentiment was propelled higher by households in the bottom third of household income. The Commerce Department estimates bonuses from the Tax Cut and Jobs Act adds $30 billion to personal income at an annual rate and households are probably starting to feel this increase. Average hourly earnings are also starting to pick-up. Average hourly earnings are 2.7 percent above their year-ago levels - a pace pushing to break out of the roughly 2.5 percent trend we ve seen over the last year. The recently released March employment report showed sub-par job growth during the month. The economy added only 103,000 jobs but that comes on the heels of phenomenal job growth in February. The unemployment rate remains at 4.1 percent - what many economists would consider an economy at full employment. We ve now had 90 months of consecutive job gains. Manufacturing continues to be a bright spot for the U.S. economy. Manufacturing added 22,000 jobs in the prior month. The ISM manufacturing survey was higher in February, suggesting a continuing expansion. Recently released data show new orders for manufactured durable goods rose strongly in February - led by increases in the transportation category. Both autos and aircraft contributed. The value of unfilled orders for motor vehicles and parts industries is over seven percent higher than a year ago. Recent threats of proposed tariffs and reciprocal tariffs to and from some of our largest trading partners is an offsetting force. These tariffs will stymie growth. Expect volatility to remain until we have greater clarity. SEMA INDUSTRY INDICATORS APR 2018 1
ECONOMICS Revised data show the economy grew a robust 2.9 percent in the final quarter of 2017 and 2.6 percent for all of 2017. Consumer spending for the year was a strong 2.8 percent on average. The most promising aspect was the return of business fixed investment which grew 6.3 percent after an average decline of 0.2 percent in the prior six quarters. Early projections for the first quarter suggest sub-two-percent growth, but this is likely a poor gauge of underlying economic health for the year ahead and we expect growth to improve in subsequent quarters. Consumer sentiment reached its highest level since 2004, though it declined marginally from the mid-month reading. Gains in sentiment this month were driven by households with incomes in the bottom third. This bodes well for spending among this cohort of households. The index actually fell for households in the top third - driven lower by uncertainty related to the impact of tariffs and government economic policy. As interest rates rise, consumers will weigh the trade-off between spending and savings. The employment report noted strong wage growth which should support near-term consumer sentiment, even in the face of rising uncertainties. Consumer spending has slowed since the start of the year and has caused concern that the consumer is faltering. The slowdown is not worrisome yet. Rather the slowdown in spending is most likely driven by consumers taking a breather after strong holiday spending. This is a pattern we ve seen in recent years. A healthy job market is keeping unemployment low and starting to exert upward pressure on wage growth. Household balance sheets remain solid despite volatility in the equity markets. Moreover, the enacted tax cuts will provide further support to spending in the course of the year. U.S. ECONOMIC GROWTH 1 - -1 Real GDP (Q/Q % Change SAAR) 12 per. Mov. Avg. (Real GDP (Q/Q % Change SAAR)) Bureau of Economic Analysis, Astra Insights CONSUMER SENTIMENT 120 110 100 90 80 70 60 50 Consumer Sentiment (1966:Q1=100) 12 per. Mov. Avg. (Consumer Sentiment (1966:Q1=100)) University of Michigan, Astra Insights CONSUMER SPENDING 2.9% 6% 2% -2% - Consumer Spending (Y/Y % change) 12 per. Mov. Avg. (Consumer Spending (Y/Y % change)) 101.4 2.8% Bureau of Economic Analysis, Astra Insights SEMA INDUSTRY INDICATORS APR 2018 2
ECONOMICS Employers added just 103,000 jobs to payroll over the last month. The unemployment rate remains unchanged at 4.1 percent. With a low unemployment rate, weak job growth isn t completely unexpected. We ve now had 90 consecutive months of job gains. We also had very strong gains in February so weakness over the last month could be viewed as payback. Over the last month we did see strong gains in wage growth. Average hourly earnings are up 2.7 percent over the last year. Manufacturing reported 22,000 new jobs over the last month. U.S. UNEMPLOYMENT 11% 1 9% 8% 7% 6% 4.1% 3% U.S. Unemployment Rate 12 per. Mov. Avg. (U.S. Unemployment Rate) Bureau of Labor Statistics, Astra Insights The US dollar exchange rate against other world currencies increased 0.4 percent over the last month. It is now down 5.6 percent on a year-over-year basis. Concerns of a trade war driven by reciprocal tariffs between China and the United States place downward pressure on the dollar. Volatility and risk also drive investors away from the U.S. dollar and towards safehaven currencies like the Japanese Yen. At the same time, strong underlying economic fundamentals and expectations of rising interest rates bolster the dollar because the currency becomes more attractive from a yield perspective. Auto parts production in the United States increased 0.8 percent in February and is up 6.7 percent since last year. February saw strong gains in overall industrial production, driven by broad-based improvements in manufacturing activity. Strength in the manufacturing sector pushed factory utilization rates higher. At 76.9 percent, factory utilization is the highest it has been in the current expansion. TRADE WEIGHTED U.S. DOLLAR INDEX 2 1 1 - -1-1 Trade Weighted U.S. Dollar Index (Y/Y % change) 12 per. Mov. Avg. (Trade Weighted U.S. Dollar Index (Y/Y % change)) Federal Reserve, Astra Insights INDUSTRIAL PRODUCTION: AUTO PARTS 1 1 - -1-1 -2-2 2007 2009 2011 2013 2015 2017-5.6% 6.7% Industrial Production: Auto Parts 12 per. Mov. Avg. (Industrial Production: Auto Parts) Federal Reserve, Astra Insights SEMA INDUSTRY INDICATORS APR 2018 3
AUTOMOTIVE New vehicle sales increased 2.5 percent in March from the prior month on a seasonally adjusted basis. This marks only the fourth monthly increase in the last 15 months. New vehicle sales increased 4.1 percent last month compared to March 2017. Hurricane-related replacement had supported sales in final months of 2017, but that is tailing off. Total light vehicle sales totaled 17.17 million units in 2017, down from 17.47 million units in 2016. Astra Insights expects new vehicle sales will decline another 1.6 percent in 2018. Gas prices remained roughly flat in March, up a penny from February 2018. Gas prices are up 27 cents from last March, roughly 11 percent higher than the year-ago period. We are beginning to move into the spring maintenance season when refineries switch over to more expensive blends. Gas prices should climb in the coming months as a result. We expect to see prices 5-8 cents higher over the next two months. Gas prices are anticipated to average just over $2.60 in 2018 and trend slightly lower in 2019. Travel on all roads and streets in the U.S. increased by 0.4 percent in January 2018, compared with January 2017. Travel for January 2018, the most recent month for which data are available, was estimated to be 245.5 billion vehicle miles, up 0.93 billion vehicle miles from a year ago. This total includes 69.8 billion vehiclemiles on rural roads and 175.7 billion vehicle-miles on urban roads and streets. MONTHLY NEW LIGHT VEHICLE SALES 2,050 1,550 1,050 550 50 Light Vehicle Sales - SA Thousands 12 per. Mov. Avg. (Light Vehicle Sales - SA Thousands) Bureau of Economic Analysis, Astra Insights GAS PRICES 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 U.S. All Grades All Formulations Gas Price 12 per. Mov. Avg. (U.S. All Grades All Formulations Gas Price) U.S. Energy Information Administration, Astra Insights VEHICLE MILES TRAVELED 1,450 $2.71 3% 2% 1% -1% -2% -3% 1.1% Total Vehicle Miles Driven 12 MA (Y/Y % Change) U.S. Federal Highway Administration, Astra Insights SEMA INDUSTRY INDICATORS APR 2018 4
INSIGHTS FROM SEMA VEHICLES IN OPERATION (VIO) DATA There are approximately 271 million light vehicles in operation in the United States today, of which over 122 million are passenger cars and 149 million are light trucks. Together, mid-range / traditional cars and pickup trucks represent almost half of the vehicles on the road. The specialty equipment market is a $41 billion dollar industry. Customers spend the most money on pickup upgrades, followed by mid-range / traditional and SUV upgrades. Mid-Range / Traditional Pickup CUV SUV Small Car Van Upscale Sports Car Alt Power 1% 7% 6% 11% 1 13% 2 % of Vehicles on Road Source: SEMA Member VIO, Powered by Experian, Data as of December 31, 2017 SPECIALTY EQUIPMENT MARKET SIZE BY VEHICLE SEGMENT Pickup Mid-Range / Traditional SUV CUV Upscale Small Car Sports Car Van Alt Power $4.10 $3.36 $2.85 $2.77 $1.44 $0.33 Source: 2016 SEMA Consumer Market Data $7.42 $6.47 USD Billions $12.05 2 HIGHLIGHTS FROM THE SEMA INDUSTRY PERSPECTIVES REPORT CHANGE IN COMPANY SALES OVER PAST 12 MONTHS The specialtyequipment industry is growing. Most companies have benefited from increased sales over the past year and expect this trend to continue next year. EXPECTED CHANGE IN INDUSTRY-WIDE SALES OVER NEXT 12 MONTHS Most expect the industry as a whole to continue to grow. INCREASED STAYED SAME DECREASED MANUFACTURER 6 22% 13% DISTRIBUTOR 59% 31% 9% RETAILER 56% 31% 13% INCREASE STAY SAME DECREASE MANUFACTURER 63% 27% DISTRIBUTOR 59% 26% 8% RETAILER 58% 27% 6% TOP 3 ISSUES FACING INDUSTRY OVER NEXT 5 YEARS Retail and regulatory changes are key concerns for the future, as well as increasing vehicle complexity. TOP 3 ISSUES Increasing government, regulatory, or social pressure Change in retail landscape / pricing pressure Increasing vehicle complexity / vehicles becoming harder to modify WANT TO FIND OUT MORE? Download the SEMA Industry Perspectives Report at: www.sema.org/research SEMA INDUSTRY INDICATORS APR 2018 5
APPENDIX U.S. ECONOMIC GROWTH: Gross Domestic Product, or GDP, is a measure of a country s total economic activity. It represents the value of all goods and services produced within a country. More simply, it s the sum of a country s consumption, government expenditures, investments, and net exports. This graph shows the percent change per quarter at a seasonally adjusted annualized rate. CONSUMER SENTIMENT: The Index of Consumer Sentiment comes from the University of Michigan s Survey of Consumers. The index captures consumers opinions on a variety of factors, such as how their current financial situation compares to a year ago, how they expect their financial situation to change and whether the next 12 months are a good time to buy a new vehicle. CONSUMER SPENDING: Personal consumption expenditures (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. The index is adjusted for inflation and seasonality. CIVILIAN UNEMPLOYMENT RATE: The unemployment rate is the number of unemployed individuals as a percent of the total labor force. The Labor force includes all individuals 16 years of age and older who reside in 1 of the 50 states or the District of Columbia. Unemployed individuals are individuals who have actively sought work within the past four weeks. TRADE-WEIGHTED U.S. DOLLAR INDEX: The trade-weighted U.S. dollar index provides a measure of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners. It provides a gauge for how the U.S. dollar is performing against global currencies. A weaker dollar vis-à-vis other world currencies will make U.S. produced goods more attractive to foreign buyers. It can also mean a higher relative price for imported goods. INDUSTRIAL PRODUCTION - AUTO PARTS: Industrial production of auto parts is a measure of real output for all facilities located in the United States manufacturing auto parts and allied goods. Growth in the production index from month to month is an indicator of growth in the industry. TOTAL LIGHT VEHICLE SALES (THOUSANDS OF UNITS): Total U.S. cars and light trucks sold per month, including both domestic and foreign brands. CONTACT INFO sema.org Kyle Cheng kylec@sema.org 909.378.4861 AstraInsights.com Shawn DuBravac, PhD, CFA Shawn@AstraInsights.com 703.980.8892 AVERAGE U.S. GAS PRICE (PER GALLON): Weekly average U.S. retail gasoline prices per gallon. This includes all grades and formulations. VEHICLE MILES TRAVELED: The Federal Highway Administration s Traffic Volume Trends is a monthly report based on traffic count data. These data are collected at approximately 4,000 continuous traffic counting locations nationwide. Estimates are re-adjusted annually to match the vehicle miles of travel from the Highway Performance Monitoring System and are continually updated with additional data. Copyright 2018 SEMA and Astra Insights. All Rights Reserved. SEMA INDUSTRY INDICATORS APR 2018 6