TORONTO, Oct. 4, 2012 /CNW/ - Global vehicle sales increased a healthy 8% year over year (y/y) in July and August, led by double-digit gains in South America in response to a US$10 billion stimulus package in Brazil.  Purchases also continue to gain momentum in China, with volumes advancing 11% above a year earlier in August. However, purchases in the rest of Asia have softened, held back by lower sales in India. More recently, activity in Japan edged down y/y in September, undercut by the end of government subsidies for eco-friendly vehicles.

"In the United States, passenger vehicle sales continue to gain momentum, with purchases revving up to an annualized 14.9 million units in September," said Carlos Gomes, Scotiabank's Senior Economist and Auto Industry Specialist. "That's the highest level since March 2008 and well above the average of 14.2 million units during the previous eight months."

Sales also remain solid in Canada, advancing 6% y/y last month, and climbing to the second-highest level on record for the month of September. According to the report, purchases totalled an annualized 1.67 million units last month, in line with the average of the past year.

"After a summer lull that added to the manufacturing doldrums of recent months, auto assembly plants have started to ramp up across most of the world and will provide a significant boost to manufacturing and overall economic activity in the final quarter of 2012," said Mr. Gomes.

Russia and Brazil will lead the way, with vehicle assemblies in both nations scheduled to post double-digit y/y increases. However, every region except Western Europe is expected to post solid output gains in coming months, helping to revive global manufacturing activity.

Automakers are once again running their North American plants at full tilt, with several facilities either adding a third shift or scheduling overtime for the next several months to ensure that the industry has enough supply on hand to meet stronger-than-expected demand. The improvement in vehicle production will help bolster manufacturing prospects at a time when durable goods orders in other sectors have been weak.

"In contrast, sales in Western Europe continue to deteriorate with preliminary sales results for September pointing to at least a 15% slump across the region - double the 7.5% decline through August," noted Mr. Gomes. "Even prior to the double-digit downturn in September, French and Italian automakers had announced work stoppages up to three weeks due to weak demand."

According to the report, compounding the pain for most European mass market automakers is the loss of market share to manufacturers who have limited production in Europe.

Scotiabank 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.

Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With more than 81,000 employees, Scotiabank and its affiliates serve some 19 million customers in more than 55 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. With assets of $670 billion (as at July 31, 2012), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com.

SOURCE: Scotiabank - Economic Reports