TORONTO, Dec. 4 /CNW/ - The global car sales recovery continues to gain momentum, according to the latest Global Auto Report released today by Scotia Economics. U.S. dealer inventories remain extremely low, and combined with improving sales will lead to a double-digit gain in North American vehicle output next year.
"Despite the sharp increase in vehicle production since August when dealer stocks plunged to a record low, overall inventories have barely increased and are still more than 40 per cent below the year-end average of the past 20 years," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotiabank. "We believe that rising vehicle sales - especially in the key U.S. market - will become the main driver underpinning gains in vehicle output across North America going forward."
Vehicle purchases in the United States have reversed the downward sales trend, with volumes advancing above a year earlier in three of the past four months alongside a nascent economic recovery, even with automakers trimming incentives. This represents the best performance since late 2006, and will be supported by rising real incomes going forward.
"In addition to improvement in labour markets and incomes, stable new vehicle prices in Canada and United States, partly due to a shift towards smaller cars, have lifted affordability to the highest level on record," commented Mr. Gomes. "We estimate that a typical U.S. household now has to work only 13 weeks to purchase a new car - nearly 20 per cent less than the average of the past decade."
In Canada, affordability is also at one of the best levels over the past two decades, despite some recession-induced slowdown in household income growth over the past year. Canadian households now have to work an average of 18.7 weeks to purchase a new car, significantly less than the 21.8 week average of the past decade.
Further Sharp Output Gains in Early 2010
According to the report, improving U.S. sales have enabled automakers to lift North American production schedules to an annualized 10.8 million units for the final months of 2009. This represents a double-digit increase from the 9.7 million units assembled in the third quarter, and further gains are scheduled for the opening months of 2010.
"We estimate that overall first-quarter production will likely climb nearly 10 per cent above current levels," said Mr. Gomes. "This increase will continue to boost economic activity across North America, adding at least 0.5 percentage points to GDP growth in the opening months of 2010.
"Canadian assembly plants are leading the way," concluded Mr. Gomes. "Vehicle output in Canada will climb 10 per cent year-over-year (y/y) in the final months of 2009, compared with a flat y/y performance in the United States and a small decline in Mexico."
Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
