The Auction Market In 2015 & 2016 Review & Forecast Dr. Ira Silver NAAA Economist silver@naaa.com
Agenda Economic conditions Economic outlook Light vehicle sales Light vehicle sales outlook NAAA 2015 Annual Survey results Auction industry outlook Take-always
BREXIT Probable Effect Small Negative Small negative for U.S. through stronger dollar and resulting weaker U.S. exports Additional adverse impact if financial markets are negatively affected which has not happened Positive impact of U.S. lower interest rates Less chance of a Federal Reserve mistake of raising interest rates too much, too soon Any major EMU country exit contagion is very unlikely due to the cost and complexity of breakup with a common currency
Recessions On Slides To Come Shown by gray shaded area Shown by red bars
Real Gross Domestic Product Real Gross National Product 0.2 3.1 2.7 1.4 2.0 3.9 3.9 2.7 2.5 1.7 1.3 4.6 3.8 2.9 2.7 3.0 1.9 1.9 0.8 1.1 0.5 0.1 4.6 4.3 3.9 2.1 2.0 1.4 1.1 0.6-2.7-0.5-1.9-5.4-8.2-1.5-0.9 Percent Change From Prior Quarter at Annual Rate Percent Change From Prior Year 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Economic Growth Remains Low Real Gross Domestic Product Percent Change 4.4 4.7 4.1 1.0 1.8 2.8 3.8 3.3 2.7 1.8-0.3 2.5 1.6 2.2 1.5 2.4 2.4-2.8 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Not All Bad Recessions in the past: Long periods of above average growth Lead to higher inflation as labor and productive resources are stretched The Federal Reserve raises interest rates to slow that growth This recovery/expansion: Below average growth Labor and productive resources are not stretched Inflation has not increased Federal Reserve has not increased interest rates
A Closer Look At Real GDP Percent Change 13.5 11.9 9.0 7.7 6.2 9.5 8.9 6.9 1.9 2.3 2.7 3.1 3.0 2.5 2.8 1.5 1.7 0.5 1.8 3.4 3.4 2.8 1.1 4.4 1.4 0.6-2.5-2.7-0.3-1.0-1.9-1.9-2.4-2.7-3.3 Consumer Business Housing Exports Federal State/Local 2010 2011 2012 2013 2014 2015-5.7
Federal Spending & GDP, Percent Change 3.2 2.3 4.4 4.5 2.6 3.7 Strong growth in federal spending after the serious 1982 recession helped propel the strong recovery 6.5 4.6 7.3 3.3 7.9 4.2 5.9 3.5 3.5 4.2 3.8-0.2-1.9 GDP Federal Spending -1.3 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 2.7 1.8 2.5 1.7 6.8 5.7-0.3-2.8 4.4 Declines in federal spending after the serious 2008 recession hurt the recovery 2.5 1.6 2.2 2.4 2.4 1.5-0.3-1.9-2.7-2.4-5.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Employment Gains Lessen But Still Strong 200 0-200 Longest string of job gains in U.S. history -400-600 -800 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Strong Employment Growth Low Unemployment Rate Best two-year gain since 1999 9.9 1,951 2,042 2,514 3,015 2,744 9.3 2,092 2,087 2,149 2,311 1,147 1,066 8.5 113 7.9 7.3-500 6.7-1,726 6.0 5.7 5.7 5.6 5.4 4.9 5.0 5.0-3,569 4.4 3.9-5,070 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Change in Employment (000s) Unemployment Rate (%)
82.0 Labor Resources Not Stretched Prime Age Workers Dropped Out Many Have Not Yet Returned 10 81.0 80.0 79.0 78.0 77.0 76.0 75.0 Employment-Population 25-54 Unemployment Rate 9 8 7 6 5 4 74.0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 3
Productive Capacity Not Stretched Capacity Utilization Is Low 85.0 83.0 81.0 79.0 77.0 75.0 73.0 71.0 69.0 67.0 65.0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
2.2 Strong Automotive Recovery Weak Housing Recovery 20.0 18.0 1.7 16.0 14.0 1.2 0.7 0.2 Housing Starts (left axis) Light Vehicle (right axis) 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 12.0 10.0 8.0 6.0 4.0
Weak Housing Recovery Much Room For Growth Housing Starts, Thousands of Units 1,573 1,601 1,710 1,854 1,950 2,073 1,812 1,342 900 784 928 1,001 1,107 554 586 612 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 Household Financial Obligations Percent of Disposable Personal Income At Historic Lows 14.5 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Higher Stock & House Prices Improve Household Willingness & Ability To Spend 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 300 S&P 500 (left axis) House Price (right axis) 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 240 220 200 180 160 140 120 100
Real Gross Domestic Product Slow, But Steady Percent Change
New Light Vehicle Sales Hit Record Millions Of Units 17.3 17.1 16.8 16.6 16.9 16.9 16.5 16.1 13.2 3% 1% 0% -1% -2% -1% -3% -3% 10.4 11% 10% 13% 11.6 12.7 14.4 15.5 16.4 17.4 8% 6% 6% -18% -21% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 New Vehicle Sales Percent Change
Light Trucks Lead The Way Millions of Units 18.0 16.0 14.0 12.0 10.0 8.0 8.6 8.8 8.8 9.1 9.4 9.3 8.7 8.5 6.4 5.0 5.9 6.6 7.2 7.9 8.7 9.9 6.0 4.0 2.0 8.8 8.4 8.0 7.6 7.5 7.7 7.8 7.6 6.8 5.4 5.6 6.1 7.2 7.6 7.7 7.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Autos Light Trucks
Future Auto Sales Drivers
New Light Vehicle Sales Hit A New Record Millions Of Units 17.3 17.1 16.8 16.6 16.9 16.9 16.5 16.1 13.2 3% 1% 0% -1% -2% -1% -3% -3% 10.4 16.4 17.4 17.5 17.2 13% 11% 10% 14.4 15.5 8% 11.6 12.7 6% 6% 1% -2% -18% -21% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 New Vehicle Sales Percent Change
Used Vehicle Retail Sales Slow Growth Millions of Units 43.6 42.7 44.1 42.6 41.4 1.3% 3.4% 36.5 35.5 35.7 0.6% 36.6 2.4% 37.7 38.4 38.8 39.4 2.9% NA 1.1% 1.5% -2.0% -3.6% -2.7% -2.8% -11.8% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NA: Not available Used Vehicle Sales Percent Change
2015 NAAA Survey
Three Years of Strong Growth Auction Volume - Millions Of Units Sold
Auction Units Sold By Source Percent Change 15.2% 12.0% 12.4% 8.3% 2.6% 2.2% 3.8% 4.8% 3.4% 5.2% 7.6% 4.4% 9.5% -0.2% -1.5% -0.9% -12.4% -11.3% -9.4% -16.4% -15.4% -21.3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dealer Consignment Commercial Consignment Total
17.1 14.7 Units Entered & Sold Conversion Rate Moves Up Millions Units 13.9 13.8 14.5 15.2 15.7 16.6 60.8% 9.5 9.0 59.5% 8.3 7.7 7.9 8.2 8.7 9.3 55.4% 55.8% 55.5% 55.9% 54.2% 54.2% 2008 2009 2010 2011 2012 2013 2014 2015 Units Entered Units Sold Conversion Rate
Average Auction Price Highest Ever
Gross Value Record High Billions of Dollars 83.0 84.1 88.5 90.5 84.7 82.6 79.7 75.0 74.2 75.7 81.8 8.0% 90.6 10.8% 5.3% 1.2% 2.2% 1.9% -1.7% -2.4% -3.5% -1.0% -6.4% -5.9% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Gross Value Percent Change
Six Years of Growth Auction Volume - Millions Of Units Sold
Take-Always Brexit not a serious problem Economic growth slow, but steady Conditions for recession not there New light vehicle sales topping but not collapsing Past strength in light vehicle sales support continued growth in total auction volume
The Auction Market In 2015 & 2016 Review & Forecast Dr. Ira Silver NAAA Economist silver@naaa.com