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Economic

• The economic picture weakened further last week, even as markets found some reasons for optimism. Hopes for progress in the Middle East pushed Brent crude toward $83 per barrel, helping the 10 year Treasury yield retreat from recent highs. That relief was reinforced by a surprisingly weak July jobs report.

 

• Nonfarm payrolls declined by 23,000 in July versus expectations for an 80,000 gain, while May and June were revised lower by another 103,000 jobs. The three month average has now fallen to roughly 20,000 jobs per month. While unemployment declined to 4.1%, labor force participation fell to 61.4%, reinforcing the low hire, low fire environment we have been tracking.

 

• The consumer is also showing signs of strain. Year over year spending trends have now been negative for three consecutive weeks, with gas stations one of the few categories showing growth. Consumer credit was essentially flat in May, revolving credit contracted, and wage growth of 3.2% is running below recent inflation trends.

 

• Bond yields moved lower following the employment report as investors reduced expectations for a September rate increase. For dealers, the important question is whether lower yields eventually provide some financing relief before weakening employment and consumer spending begin having a larger impact on vehicle demand.

 

Automotive

• New vehicle demand remains relatively resilient despite the softer economic backdrop. July SAAR came in at 16.3 million, down 1.5% from both June and last year. July volume totaled 1.364 million units, down 1.8% year over year, putting the year to date SAAR at approximately 16 million.

 

• The more interesting story continues to be pricing discipline. Average transaction prices increased slightly to $49,855 while incentives declined 7.8% from June and 10.1% year over year to $3,192 per vehicle. Incentives represented just 6.4% of ATP. Manufacturers and dealers appear willing to protect margin rather than aggressively chase incremental volume.

 

• Consumer powertrain preferences continue to shift. Hybrid share reached 21.8% in the latest available data, up dramatically from 13.3% a year earlier, while BEV share remained relatively stable at 6.7%.

 

• Used vehicles are showing a different trend. Wholesale depreciation continued in Week 32, with the 3 year old MMR index declining 0.6%. Wholesale inventory remains 12.6% above last year, while wholesale to retail spreads widened to $5,141 for non luxury vehicles and $7,534 for luxury vehicles.

 

• The broader used market increasingly looks selective rather than simply strong or weak. Buyers remain engaged, but they are concentrating capital on vehicles with the best combination of condition, price point, history, fuel economy, and retail turn potential. That is consistent with the broader 2026 trend toward a market where vehicle specific characteristics increasingly determine value rather than broad market appreciation.

 

Take Aways

• The macro risk is shifting toward the consumer. Employment growth, labor participation, consumer spending, credit growth, and real wage pressure are increasingly pointing in the same direction. The economy is not collapsing, but there are enough indicators of slowing demand that dealers should be watching retail activity closely. New vehicle pricing discipline remains impressive. OEMs reduced incentives despite softer year over year volume. That protects new vehicle profitability, but elevated transaction prices and affordability pressures could eventually become harder to sustain if the labor market continues weakening.

 

• Hybrid demand is becoming strategically important. A 21.8% share represents a meaningful shift in consumer behavior. Fuel economy and total cost of ownership are increasingly influencing demand, particularly as consumers remain payment sensitive.

 

• Used vehicle acquisition requires greater precision. Wholesale values are depreciating while retail values are moving considerably less, creating wider spreads but also greater inventory risk. Higher wholesale supply means dealers should not confuse greater availability with better buying opportunities.

 

• Buy the vehicle, not the market. Broad averages are becoming less useful as values separate by segment, age, condition, history, powertrain, and local retail demand. The opportunity is not simply to buy more inventory because wholesale prices are declining. It is to identify the specific VINs with the highest probability of turning quickly and profitably.

 

Bottom line:

The market is giving dealers more inventory choices at exactly the same time the consumer is becoming less predictable. That combination rewards disciplined acquisition, tighter aging management, and vehicle specific pricing. The dealers who understand exactly what their market wants, and resist buying inventory simply because it appears inexpensive at wholesale, should be best positioned as we move through the second half of 2026.