According to data from the Q1 2019 Cox Automotive Dealer Sentiment Index (CADSI) released, U.S. auto dealer sentiment rebounded this quarter from the low level recorded in the last quarter of 2018, but the overall current market index remained in negative territory. The current market index rose to 48, up from 44 in the fourth quarter.

Expectations for the next quarter also rebounded, more than reversing the startling decline seen in Q4. That decline moved this critical leading indicator into negative territory for the first time when it reached 49, an all-time low. The increase in expectations this quarter was statistically significant from last quarter, but the expectations index remains significantly lower than last year's series high.

"We've seen a turnaround in dealer sentiment and the outlook for the future this quarter compared to the fourth quarter," said Cox Automotive Chief Economist Jonathan Smoke. "However, gone is the euphoria we saw this time last year as views of new- and used-vehicle sales are lower."

At the time of the survey, auto dealers had a number of issues weighing on their business. The longest government shutdown in history had recently ended. Concerns over lower, slower tax refunds and renewed calls for auto tariffs were top of mind. Plus, weather played a role with a polar vortex spreading record cold temperatures across several states. Market conditions, consumer confidence and interest rates are the key measurable differences relative to this time last year when peak optimism was based largely on expectations of strong demand fueled by tax reform.

"There is no question that it's going to be an interesting year," said Smoke. "As dealers look ahead, they have a less-than-positive view of growth in the future. We see the threat of tariffs potentially creating a pull-ahead affect in the near term, and then if tariffs are implemented, sales are expected to drop off dramatically. So, again this year, we are going to deal with an interesting roller coaster ride."