TORONTO, Feb. 28 /CNW/ - The 'Best in the West' theme continues in 2007,
with preliminary data for January indicating that vehicle purchases in Western
Canada posted a double-digit year-over-year gain, nearly double the advance
across all of Canada, according to the latest Global Auto Report released
today by Scotia Economics.
    This robust performance comes on the heels of a two per cent gain in
Canadian vehicle sales in 2006, as strength in Western Canada more than offset
flat volumes east of the Manitoba/Ontario border.
    "We expect vehicle sales to strengthen further in Western Canada this
year, especially in Alberta and British Columbia," says Carlos Gomes,
Scotiabank's auto industry specialist. "However, purchases east of Manitoba
will likely weaken, as slowing growth in the United States continues to dampen
economic activity. In fact, we expect declining sales in Central and Atlantic
Canada to reduce overall Canadian purchases to 1.55 million units in 2007 from
1.61 million last year."
    Sales are expected to be strongest in Alberta, climbing to a record high
of 239,000 units in 2007, up from 236,000 last year and an average of only
186,000 over the past decade. Continued oil sands development and an ongoing
boom in commercial and residential construction have lifted employment growth
to more than six per cent year-over-year. However, after two consecutive years
of double-digit gains, the increase in vehicle sales will moderate to a
single-digit advance, as oil and gas drilling activity moves lower in 2007.
    Vehicle purchases in British Columbia are expected to climb to 191,000 in
2007, up from an average of 186,000 over the past two years. Employment and
income growth continue to be buoyed by construction, energy, mining and the
service sector. However, slowing exports in the province's key forest products
sector, accounting for more than 40 per cent of overall B.C. exports, will
hold back the sales gain.
    Sales in Saskatchewan and Manitoba are likely to edge up to 83,000 units
in 2007, from an average of 81,000 over the past three years. Saskatchewan is
expected to outperform, as demand for corn and canola, used to produce ethanol
and bio-diesel, lifts grain prices and farm incomes. Non-residential
construction is also strong in both provinces, with permits surging by 27 per
cent last year. While Manitoba is also benefiting from high commodity prices,
especially nickel, livestock prices are mixed and employment growth is being
held back by weak manufacturing exports to the United States.
    After a largely flat performance last year, vehicle sales are set to
decline in Central Canada in 2007, undercut by falling exports and weakness in
key manufacturing sectors. Nearly 130,000 manufacturing jobs have been lost in
Ontario over the past two years. The province's key auto sector has been at
the centre of the cutbacks, with vehicle production dropping by more than four
per cent last year, and auto parts suppliers cutting more than 10,000 jobs
since 2004. Further cuts are scheduled for 2007, as the traditional Big Three
continue to restructure their North American operations. With weakness
starting to broaden beyond manufacturing into construction and some service
sectors, we expect vehicle sales to decline to about 565,000 units in 2007
from an average of more than 600,000 over the past five years.
    In Quebec, the prospects for vehicle sales are also being weighed down by
weak exports. In particular, the province's major export industry, forest
products (especially lumber), experienced a five per cent reduction in export
receipts in 2006 and has eliminated more than 7,000 jobs over the past two
years. As a result, vehicle sales in Quebec are likely to decline to
370,000 units in 2007 from an average of nearly 400,000 over the past two
years.
    In Atlantic Canada, weak employment will drag down vehicle purchases in
2007.  We expect sales in the region to decline to 106,000 units, from an
average of 109,000 over the past two years.  However, volumes should
outperform in Halifax, where employment growth has strengthened in recent
months, as the city is increasingly becoming the financial hub of Atlantic
Canada.
    Vehicle sales in North America began 2007 on a mixed note. Volumes
advanced in Canada and Mexico, but were weaker than expected in the key U.S.
market. Sales in the United States fell four per cent below a year earlier in
January, declining to an annualized 16.7 million units from 17.5 million a
year ago.
    "Volumes were undercut by sharply lower sales to rental car companies for
the traditional Big Three," says Mr. Gomes. "As a result, Ford's overall U.S.
sales slumped by 19 per cent year-over-year in January, while the decline was
17 per cent at General Motors. Given these weak results, GM trimmed its
first-quarter North American output schedule by an additional 40,000 units or
four per cent."
    Canadian passenger vehicle sales began the year on a strong note, with
purchases advancing six per cent year-over-year to an annualized 1.62 million
units, the third consecutive solid monthly performance.
    "Volumes were likely buoyed by a pick-up in employment growth in late
2006 as well as mild weather through mid-January," adds Mr. Gomes. "Purchases
were particularly robust among imported models, with several automakers
posting record sales for the month of January."

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