Global Auto Sales Accelerate to Record Highs
Global car sales have gained momentum this year, rising a stronger-than-expected 5 percent through July. The improvement reflects a modest acceleration among the G7 countries, especially Western Europe, as well as a rebound in purchases across emerging markets.
While gains are expected to moderate through year-end, a recently-released report from Scotiabank, a Canadian financial institution, concluded that strengthening labor markets and improving financial conditions suggest that the automotive upswing will continue in 2017.
Car sales in Western Europe have advanced seven percent year over year through July, the report noted, the strongest gain in nearly two decades.
“The improvement is being supported by a strengthening labor market,” the report said, “which is reducing unemployment at the fastest pace in nearly a decade.” The jobless rate in Germany, for example, is at the lowest level since 1990.
North American vehicle sales exceeded 20 million units last year for the first time on record and have increased an additional three percent year over year through July. U.S. sales rose in July to an annualized 17.9 million units, the highest level of the year.
“The health of the U.S. consumer is the main driver of the North American sales outlook, and most indicators continue to point to ongoing gains,” said Carlos Gomes, senior economist and auto industry specialist at Scotiabank. “U.S. job growth is advancing by nearly two percent year over year, vehicle affordability remains near record highs, and there is no evidence of deterioration in the automotive finance market.”
There are still nearly 50 million vehicles on the road in the United States that were built prior to the new millennium, and as a result U.S. purchases are expected to continue to move higher for the remainder of the year and in 2017.
Purchases in China shifted into double-digit growth in 2016, supported by a 50-percent reduction in the sales tax from 10 percent to five percent for new vehicles with engine capacity of less than 1.6 liters, as well as improvement in most key leading indicators of auto sales. Double-digit sales gains will continue through year-end in China, according to the Scotiabank report, and are being led by second-tier cities with vehicle penetration rates much lower than Beijing and Shanghai.
Car sales in emerging markets have started to recover from last year’s slide, although Russia and Brazil continue to report double-digit declines.
Purchases in Asia have jumped nine percent so far this year. Car sales in Indonesia have advanced 13 percent year over year in recent months, reversing a 16-percent slump in 2015.
Chile is leading the improvement in South America with a 6.5-percent advance in sales. However, volumes in Brazil have slumped 22 percent year over year through July, dragging the region down for the third consecutive year.
The Brexit vote will likely reduce purchases across the U.K., the report concluded, although sales in the UK were already at record highs and gains started to moderate prior to the referendum.
Sales in Canada have also gained momentum this year, advancing in seven of the ten provinces. Mexico is leading North American sales gains, with volumes surging 18 percent so far this year.