- Further Sharp Declines in Most Regions Outside of China

    TORONTO, Jan. 8 /CNW/ - Following several years of record highs, global
car sales have been in a severe and precipitous fall-off since September, as
the international financial crisis has led to a synchronized global economic
slowdown and nearly a 30 per cent year-over-year slump in car sales in late
2008, according to the latest Global Auto Report released today by Scotia
Economics.
    "We expect the double-digit year-over-year declines to continue through
the first half of 2009, amid a simultaneous recession in North America,
Western Europe and Japan," said Carlos Gomes, Scotiabank Senior Economist and
Auto Industry Specialist. "Purchases are however expected to stabilize in the
second half of 2009, limiting the slump in global car sales to an average
decline of 8 per cent this year. Nevertheless, the fall-off will be steeper
than the 5 per cent average drop in global volumes in 2008 - the first
downturn since 2001.
    "The accelerated pace of monetary easing by central banks around the
world since early October, as well as stimulus packages being introduced by
many governments, should help buoy global economic activity by the second half
of 2009, leading to some stabilization in vehicle purchases," added Mr. Gomes.
"History indicates that growth in car sales normally resumes, at the earliest,
about nine months after a sharp drop in short-term interest rates. This
reflects the fact that employment and income growth are the key drivers of
vehicle sales and these variables are still in retrenchment mode."
    According to the report, the United States has led the downturn in global
sales, with volumes undercut by falling house prices, the ongoing credit
crunch and a deteriorating labour market. U.S. vehicle purchases plunged to
nearly 10 million in the fourth quarter of 2008, from an average of 16.7
million over the past decade. U.S. volumes are likely to remain around current
levels in the opening months of 2009, as declining real incomes offset some
improvement in credit availability.
    In Western Europe and Japan, vehicle sales will remain weaker for longer.
Economic activity across the euro zone continues to shrink alongside declining
employment and the lowest consumer confidence since the early 1990s.
    "Vehicle sales held up better in Canada than in other mature markets
through October, but are now also being pulled lower by the global financial
crisis, that has spilled into this country," added Mr. Gomes. "Purchases
slumped by 21 per cent year-over-year in December, leaving full-year 2008
sales at 1.64 million units - virtually unchanged from 2007. However, we
expect purchases to post a double-digit drop in 2009, falling to 1.475 million
units - the lowest level since 1998 - as unemployment climbs to 8 per cent."
    Emerging markets, such as China and India, which until recently, were
among the main source of strength in global sales, are expected to recover
more quickly.

    Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
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