Canadian new vehicle sales came in at an estimated 184,000 units in May, with sales falling 1.7% year over year and extending the run of softer comparisons, notes Bank of Montreal (BMO)
Hopes that volumes might finally clear 190,000 units, last achieved in May 2019, were again disappointed, despite May typically being the strongest sales month of the year, said the bank.
United States light vehicle sales were more resilient, running near 16.2 million units annualized and up 3.1% year over year. While year-over-year comparisons continue to benefit from last spring's tariff-related pull-forward and subsequent payback, the underlying pace of demand has held steady, noted BMO.
BMO's takeaway on consumer engagement: Canadian and American consumers "are still hanging on -- but only just". The bank said: "A key buffer remains wealth effects from historically high equity markets, which continue to support discretionary spending among higher-income households that dominate new-vehicle demand. However, elevated fuel prices are increasingly acting as a tax on consumption, siphoning billions of dollars away from discretionary categories like vehicle purchases."
With fuel costs elevated and geopolitical risks mounting, any pullback in equity markets would further cloud the outlook, suggesting vehicle sales momentum remains vulnerable through the rest of the year, according to BMO.