Car sales fall as consumer confidence wanes

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Car sales fall as consumer confidence wanes

Post  Administrator on Thu Aug 04, 2011 9:23 pm

New vehicle registrations fell by 3.5 per cent last month as retail buyers held off on purchases or bought used cars, according to the organisation representing Britain’s automakers.

A total of 131,634 new cars were registered in July, marking the 13th consecutive month that the figure fell year-on-year, the Society of Motor Manufacturers and Traders reported on Thursday.
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Though small, the drop is significant in that it appears to reflect a real contraction in consumer demand for cars. In the first half of this year, the year-on-year registration comparisons were still being skewed artificially downwards by government-supported scrappage incentives that boosted the market in the first part of 2010.

Paul Everitt, the SMMT’s chief executive, said the drop in July reflected “the impact of slower growth and subdued consumer confidence”.

Cars registered by private buyers were down 9.2 per cent on a year ago. This was offset in part by a 2.1 per cent rise in fleet sales in July as more businesses that had postponed replacing their company cars during the financial crisis moved to do so.

Howard Archer, chief UK and European economist with IHS Global Insight, wrote that the drop in private sales “reflects the serious pressure that households are under, most notably the major squeeze on their purchasing power coming from high inflation, muted wage growth and the
increased fiscal squeeze”.

The SMMT said that the market remained on track to meet its full-year forecast of 1.93m units.
Britain’s car market is now down 6.7 per cent on a year ago for the year to end-July.

John Leech, partner in KPMG’s automotive practice, wrote that “earlier forecasts that car sales would end this year down around 5 per cent are starting to look optimistic”.

However, some analysts warned against reading too much into the figures, as July is traditionally a slow month for car registrations. “I forecast that August will also show a decline, but all eyes will be on the industry’s September figures, when new registration plates are issued”, David Raistrick, UK manufacturing leader at Deloitte, wrote.

Nor is the drop in car sales indicative of broader malaise in Britain’s car industry, which exports the bulk of what it makes.

Production of vehicles was up 3.3 per cent and engines up 4.7 per cent in the year to June compared with a year ago, according to the SMMT. Nissan and Jaguar Land Rover are among the carmakers who have been hiring recently to keep up with demand from their vehicles, coming primarily from overseas.

“Vehicle manufacturers are set to face a ‘twin-speed’ global market for decades to come, with growing far east markets and sluggish western markets”, Mr Leech said.

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