TORONTO, Feb. 25 /CNW/ - Rising global vehicle sales and profitability have encouraged automakers to continue to increase vehicle production, providing the global economy with some positive offset to the dampening impact of the recent surge in energy prices, according to the latest Global Auto Report released today by Scotia Economics.

"During the latest financial reporting season, virtually every automaker increased their full-year 2011 global sales forecast and boosted their production schedule for the opening months of 2011," said Carlos Gomes, Senior Economist, Scotia Economics. "We estimate this will lead to a further double-digit year-over-year increase in vehicle production in most countries during the first half of the year."

According to the report, China - the world's leading vehicle-producing nation - will lead the increase in vehicle output, with full-year assemblies expected to jump 17 per cent to more than 21 million units. In fact, vehicle output in China will surpass European assemblies - the traditional vehicle production leader - in 2011 and account for about 28 per cent of overall global vehicle output. This is more than double its 13 per cent share as recently as 2008, and a sevenfold jump from only a four per cent share a decade ago.

"Surging car sales in China are also lifting vehicle production in Western Europe, especially Germany," continued Mr. Gomes.  "In January, global sales for Germany's three major automakers jumped 21 per cent above a year earlier, led by a 31per cent year-over-year surge in China. This sharp increase prompted manufacturers to significantly add to their first-half vehicle production schedules. We estimate that over the past month, European automakers have boosted their first-quarter output plans by more than six per cent and their second-quarter schedules by two per cent."

Rising output schedules will also enable assemblies in Germany to surpass their pre-recession peak in 2011 - a first among developed nations. Vehicle production in Germany will likely climb to 6.3 million units in 2011, overtaking the previous record of 6.2 million set in 2007.  This reflects the rising popularity of luxury models across the globe, but especially in China, as well the as heavy export-orientation of Germany's automotive sector - roughly 75 per cent of all vehicles produced in Germany are exported.

In the report, Mr. Gomes noted that the auto industry will also add to economic growth in Latin America. Sales continue to advance in Brazil, Argentina, Chile and Peru, leading automakers to plan for an additional 13 per cent increase in vehicle production over the coming year. While this is a moderation from a 15 per cent jump in 2010, the industry will continue to support economic growth.

The NAFTA region - Canada, the United States and Mexico - is also expected to post a solid increase in vehicle assemblies this year. In the United States, the latest U.S. industrial production report confirmed that motor vehicle output jumped 3.2 per cent month-to-month in January - the largest increase among all industrial sectors - and 15 per cent above a year earlier. Further gains lie ahead as automakers have planned a 20 per cent year-over-year jump in first-quarter assemblies to better align output with strengthening demand. 

Canada is scheduled to post the largest increase in vehicle output across North America in early 2011, as production ramps up following the late-2010 retooling at a major car plant in Brampton, Ontario. The first-quarter jump in Canadian assemblies will be the largest since mid-2009, when the global economic recovery was in its infancy.

"We estimate that rising vehicle output will add roughly 1.5 percentage points to economic growth in Canada, significantly higher than the one percentage point contribution expected from the auto sector in both the United States and Mexico," concluded Mr. Gomes.

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.