Auto dealers, though buoyed by a healthy spring of sales, are expecting conditions to erode from there.

Cox Automotive’s second-quarter dealer sentiment survey noted slight improvement in current market views, up two points on its index to 43. That’s still well below the threshold of 50 that would indicate more dealers seeing conditions as positive.

Franchised dealers alone did surpass that threshold, hitting a reading of 53, up five points quarter-over-quarter.

An uptick in consumer traffic helped, pushing up that sentiment metric by eight points to a still-low 36 among franchised and independent dealers, though up sharply from near-record lows seen in the first quarter and more in line with a year earlier, Cox said.

When looking to the third quarter, though, sentiment dropped sharply from 56 to 47, though Cox said a decline is typical of post-spring outlook since the season typically brings robust sales. Still, inflation, slowing demand, and larger economic uncertainties weighed on dealers’ minds.

Even with sales recently improved, dealer profits were off last year’s second quarter, Cox reported. Its profit index ticked up four points to 36 from the first quarter but remained under its reading a year earlier. Cox cited increased operating costs eating into dealer margins, its cost index up to a year-plus high of 74.

Dealers’ greatest concerns as cited in the survey are the economy at 55%, market conditions at 40%, political climate at 36%, expenses at 33% and interest rates at 32%.

Political concerns increased among respondents, rising from fifth place last year and last quarter. Dealers specifically mentioned geopolitical tensions and policy uncertainty.

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