May Auto Sales: Stability After Spring Rebound

CANADA: AUTO SALES MOVE SIDEWAYS AFTER SPRING REBOUND

Canadian auto sales fell 0.6% month-over-month to 1.89 mn units at a seasonally adjusted annualized rate (SAAR) in May based on data from Omdia (chart 1). The monthly selling rate has trended in the 1.85–1.9 mn range since February, an improvement from the three months to January when sales averaged 1.75–1.8 mn but still below the 2 mn rate a year ago. The improvement in light vehicle sales this Spring has been supported by car sales which have increased an average 9% each month (SA) since February to the highest level in a single month since early 2024, which has been partially offset by light truck sales that have held relatively flat after increasing 4.4% m/m (SA) in February.

In non-seasonally adjusted terms, May registered 185.1 k new light vehicle sales as reported by the same source (-4.4% y/y). Sales remain down compared to the same month a year ago for the eighth month in a row but this likely continues to reflect distortions from tariffs, as demand was pulled into the Spring last year by tariff front-running that resulted in a softer H2-2025. When comparing against the same month in 2024, new vehicle sales rose 6.6%, and are higher for a third consecutive month.

While GDP data for Q1 was weaker than previously expected, growth should begin to improve over the year. Canada’s labour market added 88 k jobs in May after contracting in three of the first four months to start the year, supporting a drop in the unemployment rate to 6.6% that has averaged 6.7% since January. Meanwhile household consumption expenditure grew 1.5% q/q (SAAR) in Q1, largely driven by spending on services (2%) while spending on goods remains soft (0.7%). The surge in global oil prices pushed headline inflation to 2.8% y/y in April and is likely to stay close to 3% for the remainder of the year before slowing towards the midpoint of the Bank of Canada’s 1–3% target range next year. As such, in our latest outlook we now expect the Bank of Canada to hold the policy rate at 2.25% through the Summer as they assess inflation pressures and economic growth, with two 25 basis point (bps) hikes to the policy rate in Q4 this year and another in early 2027.

Our outlook for Canadian light vehicle sales is 1.84 mn in 2026 as we expect sales to trend sideways through the middle of the year, but could remain volatile from month to month. New vehicle sales are expected to begin improving later in the year and into next, rising to 1.88 mn in 2027, however this outlook faces large uncertainty owing to higher and volatile oil prices clouding the outlook.

UNITED STATES: AUTO SALES HOLD STEADY AS INFLATION PRESSURES BUILD

US auto sales increased 0.5% m/m to 16.1 mn (SAAR) units in May, according to the BEA (chart 2). After a softer start to the year, new light vehicle sales have held steady around 16.1 mn (SAAR) units since March. Meanwhile, non-seasonally adjusted sales for May were 1.47 mn as reported by the same source. As such, sales for the month were up 0.4% year-over-year (NSA), marking the first annual increase since September 2025, and were up 2.4% compared to May 2024.

Household consumption is likely to continue facing headwinds in the near term. The labour market has added more than 170 k jobs in each of the past three months, up from essentially stalled job growth for much of the 12 months prior, while the unemployment rate has held steady at 4.3% since March. However, overall inflation has jumped to 3.8% in April up from 2.4% at the beginning of the year, as higher global oil prices erode wage gains. The US Federal Reserve is expected to remain on the sidelines this Summer, holding the policy rate at 3.75%, as they assess the persistence and pass through of the oil price shock to inflation. We expect inflation to average above 3% for the year before gradually easing next year, with the Fed cutting the policy rate by 25 bps in Q4 and delivering another 25 bps cut in Q1-2027 as their focus shifts to supporting the labour market.

Our outlook for US auto sales is 15.8 mn units in 2026 with the sales rate slightly pulling back from the recent level before trending sideways the rest of this year, and marginally improving to 15.9 mn in 2027 as expected interest rate relief and improving labour market dynamics support consumer demand but this outlook remains highly uncertain.

GLOBAL AUTO SALES: SALES CONTINUE TO REBOUND INTO Q2

Global auto sales increased 0.7% m/m (SA) in April, rising for a third consecutive month in seasonally adjusted terms (chart 3). Growth in sales was mixed at the regional level, but the continued rebound has seen global vehicle sales increase 9% from their recent low in January to the highest level since February 2025. In western Europe, vehicle sales fell 1.0% m/m (SA), pulling back from their recent high in March, as sales only increased in five of the 15 countries tracked, but are up 7% year-over-year (NSA). Meanwhile, auto sales in eastern Europe increased 5.8% m/m (SA), but remain down 12% relative to December amid a soft start to the year. In the Asia Pacific region, auto sales increased 2.3% m/m (SA), increasing for a third consecutive month as sales rebound in line with their Q4-2025 average, however the rebound has been less robust in China where sales remain 3.5% below their Q4 average. In Latin America, vehicle sales fell 5.7% m/m (SA) in April after having surged nearly 16% the month prior owing to large swings in Brazil’s seasonally adjusted sales. Latam sales excluding Brazil continue to rise though at a slower pace, and are up 2.6% relative to their average in Q4-2025. Our outlook for global vehicle sales is a decline of 0.4% in 2026 before increasing 1.9% in 2027 but faces large uncertainty, notably owing from higher and more volatile oil prices (chart 4).