The Consumer Confidence Index can predict car sales

Rekon was recently tasked to find out the driving forces behind one of our clients’ outstanding sales figures in Q1 of 2024 in the new cars market. We explored both macro and industry level data and one of our findings was that there is a very strong correlation between new car sales and the movements in the Consumer Confidence Index (CCI), albeit with a two-month delay. This correlation was observed from January 2023 to April 2024, providing valuable insights for market analysts and car traders alike.

The Consumer Confidence Index is a crucial economic indicator that reflects the optimism or pessimism of consumers regarding their financial situation and the general economic outlook. Our investigation into this relationship revealed that fluctuations in the CCI significantly impact new car sales volumes.

During the second half of the period that we investigated, the CCI experienced a substantial increase, rising from -31.1 in December 2023 to -17.8 in March 2024. Correspondingly, new car sales surged from around 7000 units in December 2023 to almost 13 000 units in March 2024. This remarkable uptick in both the CCI and car sales highlights the sensitivity of consumer purchasing behavior to economic sentiment.

However, the trend is not limited to positive movements in the Consumer Confidence Index. The data also showed a clear pattern during periods of economic downturn. For instance, when the index dropped from -17.8 in March 2024 to -25.9 in April 2024, new car sales followed suit, decreasing from the approximately 13 000 units to a little over 10 000 units. This demonstrates that negative shifts in consumer confidence can quickly translate into reduced car purchases.

The research underscores that the correlation between the CCI and new car sales is particularly strong during significant economic changes, whether upward or downward. This finding is crucial for stakeholders in the automotive industry, including manufacturers, dealerships, and policymakers, as it provides a predictive tool for anticipating market demand based on consumer sentiment.

Moreover it is important to emphasize that any uptick in the index is only likely to show up in 2 month time in the sales figure. However those two month could represent an excellent opportunity for car dealers to pursue a marketing strategy based on the likely increase in demand. Thereby exploiting this market opportunity to the fullest and gaining an edge on its competition.  Conversely, in times of declining confidence, they can adopt strategies to mitigate the impact of reduced sales, such as offering promotions or financing deals to entice cautious consumers.

If you are interested in similar findings and their impact on your business, as well as possible ways to leverage or manage them, please feel free to contact us. We would be delighted to demonstrate how our research and forecasting expertise can help you grow your business.