- Scotia Economics forecasts Provincial auto sales for 2009

    TORONTO, March 30 /CNW/ - After a solid performance through October,
Canadian vehicle sales began to slump in late 2008 as the previously robust
resource economies of Western Canada succumbed to the global economic
downturn, according to the latest Global Auto Report released today by Scotia
Economics.
    "We have reduced our 2009 Canadian sales forecast to 1.38 million units
as the weakness has intensified, alongside a sharp reversal in purchases in
British Columbia and Alberta," said Carlos Gomes, Scotiabank Senior Economist
and Auto Industry Specialist. "Preliminary data through February indicate that
sales in these two provinces have plunged 35 per cent year-over-year (y/y),
nearly 10 percentage points worse than in the rest of Canada."
    Car and light truck purchases in British Columbia have fallen to an
annualized 130,000 units in the first two months of 2009, more than 30 per
cent below the record of 198,000 set in 2007. The slowdown reflects slowing
construction activity, the ongoing retrenchment in the forest products sector
and a sharp deceleration in employment prospects in recent months. However,
the downturn will be cushioned by a $14 billion investment in infrastructure
projects announced in the latest provincial budget.
    The sharp decline in oil prices from their mid-2008 peak has led to more
than a 30 per cent drop in drilling activity in Alberta and the cancellation
of over $40 billion of capital projects, including new oil sands upgrades.
This loss of momentum has spilled over to services, with retail sales
grounding to a halt, and vehicle sales posting double-digit year-over-year
declines since November.
    "In contrast, Saskatchewan is proving to be one of the best places to
ride out the current economic storm. The province continues to enjoy low
unemployment and increased employment opportunities," added Mr. Gomes.
"Consumer spending remains a key growth driver - as employment gains
approaching 3 per cent y/y will keep vehicle sales at 46,000 units in 2009,
well above the 41,000-unit average of the past five years, and only marginally
below the 2008 peak of 48,000."
    Manitoba has also remained resilient in the face of a weakening external
economic environment. The province is expected to post one of the smallest
declines in vehicle sales in 2009, with purchases totaling 41,000 units, down
from an average of 44,000 over the past five years.
    Vehicle sales in Ontario are expected to post the steepest drop since the
economic downturn of the early 1980s, undercut by sharply lower manufacturing
activity. In particular, auto sector production will drop by close to 30 per
cent in 2009, the largest decline on record, and the second-consecutive
double-digit annual fall-off. A weaker Canadian dollar and ongoing
infrastructure spending are providing some relief, but not enough to offset
big cutbacks in manufacturing, mining and steel production, as well as a
rapidly cooling service sector.
    Car and light truck sales in Quebec are expected to fall by more than 15
per cent this year, as the province's large forest products, manufacturing and
growing mining industries all face considerable challenges.
    "Retail activity, including vehicle sales, held up reasonably well in
2008, as tax cuts offset a marked slowing in employment growth," said Mr.
Gomes. "However, mounting layoffs and a significant erosion of confidence will
weigh on purchases in 2009."
    Unemployment in Atlantic Canada has increased by more than two percentage
points over the past year, undercutting purchasing power at a time of reduced
transfers from Atlantic Canadians working in Alberta oilfields. Vehicle sales
are likely to fall to about 110,000 units this year from a record 127,000 in
2008, but roughly in line with the average of the past decade. Purchases are
expected to hold up better in Halifax, where employment growth remains close
to 3 per cent y/y, buoyed by robust hiring in construction, professional and
technical services, and the public sector.

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