This edition of the Auto Market Weekly Summary includes updates on personal income and spending, Personal Consumption Expenditures (PCE) inflation, Gross Domestic Product (GDP) growth, and the Consumer Confidence Index: some of the best data we get all month. We’ve also included a few takeaways from Fed’s July meeting.

Q2 GDP growth came in below the market’s expectations. The modest gain was propped up by continued AI-driven investment spending and a pickup in consumer spending, but that second strength deserves a caveat: Much of the Q2 boost was fueled by larger tax refunds, a tailwind that has now largely passed and won’t prop up spending in the second half of the year.

Personal expenses continued to outpace income growth in June, and that gap is forcing more households to draw down savings. In July, the personal savings rate fell to the lowest level in four years. The good news? PCE inflation was lower in June, though it remains in the upper-3-percent range, well above the Fed’s target.

The July Fed’s meeting added another layer of complexity. The committee held rates steady, but the vote was far from unanimous. Market rates moved higher in response, with the 30-year Treasury yield rising above 5.2%, a level not seen since the summer of 2006.

Notably, the committee pulled back on forward guidance, an approach that may be intentional. With less clarity from the Fed, markets themselves may be pricing in a higher risk premium, effectively doing some of the Fed’s tightening work without a rate hike.

Auto loan rates have yet to fully reflect that move, but lenders will likely need to pass along higher funding costs before long. Both dynamics — sticky inflation and the prospect of higher financing costs ahead — pose real risk to auto sales in the second half of 2026.

Consumers’ personal finances have not improved recently, even as gas prices declined over the last month. Expense growth has continued to outpace income, pushing more people to pull from savings to make ends meet.

• Personal income grew just 0.2% month over month in June and is now 3.9% higher year over year, the same growth rate experienced in May.
• Personal spending growth slowed to 0.3% against May, down from an upwardly revised 0.9% rate for the prior month.
• On a year-over-year basis, expenses are up 6.3%, more than two percentage points higher than income growth, reflecting the pain felt by consumers this year.
• The personal savings rate declined to 2.7% in June, with May revised lower to 2.8%. As consumers have continued to see expenses outpace their income growth, savings have declined and currently sit at levels not typically seen outside of periods of consumer distress.

The inflation gauge favored by the Fed declined in June, in line with expectations. As gas prices were lower over the month, it helped lower the reading, although it remains markedly higher than the Fed’s 2% target.

• The PCE inflation reading in June fell by 0.1% against May, although the previous rise of 0.4% was revised to 0.5% for the prior month. On a year-over-year basis, PCE inflation is higher by 3.7%.
• Core PCE inflation, excluding food and energy, rose only 0.1% for the month. The metric is now up 3.3% year over year, lower than the 3.4% reading in May. 
• Services spending holds the largest weight in the PCE as the housing and health care components reside in that bucket. Both showed a deceleration in the rate of inflation for the month.
• Transportation services inflation rose to 7.3% in June, driven by airfare, public transit costs, and continued inflation in automotive maintenance and repair.
• Nondurable goods inflation decelerated in June, as energy costs declined, with gasoline and fuel inflation lower from May levels. 
• Inflation from automotive goods moved higher in June, from a negative reading in May. Increases were seen in new autos and light trucks as well as parts, while used-vehicle prices were less of a drag than the prior month.

The initial reading on Q2 GDP growth was weaker than the market anticipated. On the upside, consumer spending picked up after a slower start to the year and helped drive the overall gain.

• The first estimate for Q2 GDP growth rate was at 1.5%, down from the Q1 rate of 2.1%. The market was expecting a gain of 2.0% overall, so the initial reading was lower than expected.
• Consumer spending trends came in stronger than expected, showing a gain of 3.2%, a strong pickup from the Q1 read of just 0.5%. Spending gains were seen broadly as services increased by 2.2%, led by food services and accommodations, which could have been influenced by the World Cup.
• For goods consumption, sequential increases were seen for both durable and non-durable goods.
• For automotive, motor vehicle and parts spending showed a gain of 10.5%, up from 4.1% in Q1.
• Investment spending continued to show positive gains, driven by the AI capital expenditure buildout, and was higher by 7% in Q2 compared to 6.5% in Q1. It accounted for roughly 80 bps of the quarterly gain, helping to offset the drag from other components.
• Exports declined relative to Q1 and were the factor behind Net Exports pulling down Q2 growth, while inventories also weighed on the total. 
• Government spending was mildly negative for Q2 growth overall, and down from the rebound in Q1. 

The Conference Board’s Consumer Confidence Index fell in July, a trend that has continued for the better part of the last few years.

• The headline index fell to 90.8 in July from an upwardly revised 92.2 in June, and below the 92.4 consensus estimate.
• The Expectations Index remained steady at 74.7 as consumers foresee little improvement in business through the rest of the year. 
• The outlook for the labor market was slightly less negative, with almost 17% of consumers expecting more jobs to be available, an increase of roughly 1 percentage point.
• Consumers’ plans to buy a vehicle in the next 6 months declined for both new and used vehicles, as did those anticipating buying a home.
• Interestingly, consumers cited fewer concerns related to the prices of oil and gas, yet were more worried about the increase in food and grocery prices.